Commissioner Wopke Hoekstra has closed the door on new territorial VAT derogations for EU island regions, arguing that the current legal framework does not allow additional regionally differentiated rates and that any change would require unanimous Council approval — which is not under consideration. The answer, given on 17 July 2026, pushes back on a parliamentary question from Renew MEP Oihane Agirregoitia Martínez, who had asked whether the Commission could authorise specific VAT treatment for island regions under cohesion policy and internal market rules.
Hoekstra's response is a formal restatement of existing EU law, not a new policy initiative. He notes that limited geographical derogations already exist for specific territories in Greece (Aegean islands), Portugal (Azores and Madeira), France (Corsica), Spain (Canary Islands, Ceuta, and Melilla), and Austria (Jungholz and Mittelberg). These were introduced under strict conditions at the time of adoption of the VAT Directive, tied to insularity or remoteness, and with sunset clauses agreed by the Council. The Commissioner stresses that under the current EU VAT legal framework, it is not possible to introduce additional derogations beyond those already in place. Any change would require unanimous Council approval, which, he states, is not under consideration following a recent review of VAT rates in 2022.
The answer provides no concrete proposals, numerical targets, or procedural guidance for member states seeking new derogations. It offers only a declarative confirmation of the status quo. The policy orientation is clearly against expanding territorial VAT flexibility, prioritising legal uniformity and the difficulty of achieving unanimous Council agreement over the cohesion concerns raised by the MEP. Stakeholders most impacted are island regions seeking fiscal autonomy (e.g., EU outermost regions and islands not already covered), who face a closed legal pathway; EU member states that might have sought such derogations, who now have no procedural avenue; and the European Commission itself, which avoids reopening a politically sensitive file. On the positive side, the answer provides legal certainty for businesses operating across the EU, as it maintains a uniform VAT rate structure. On the negative side, it may perpetuate economic disadvantages for island regions that argue their structural handicaps warrant differentiated tax treatment.
No institutional follow-up is expected, as the Commission has signalled no intention to propose legislative changes. The file appears closed unless a member state brings the issue to the Council with sufficient political backing to reopen the VAT rates debate — an unlikely prospect given the Commissioner's explicit statement that it is not under consideration.