EU VAT Basics
EU VAT Basics for Freelancers and Small Businesses
This article provides an overview of Value Added Tax (VAT) rules within the European Union, drawing information from official EU sources.
EU-wide VAT rules overview
Value Added Tax (VAT) is a consumption tax applied to nearly all goods and services bought and sold for use or consumption within the EU. While the EU has standard rules on VAT, these rules can be applied differently in each EU country [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
For EU-based companies, VAT is generally charged on most sales and purchases of goods within the EU. In these cases, VAT is charged and due in the EU country where the goods are consumed by the final consumer. Similarly, VAT is charged on services at the time they are carried out in each EU country [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
VAT is not charged on exports of goods to countries outside the EU. Instead, VAT is charged and due in the country of import. As an exporter, you do not need to declare VAT for these transactions. However, you must provide documentation (e.g., invoice copy, transportation document, import customs record) as proof that the goods were transported outside the EU to your tax authorities. This proof is essential to fully deduct any receivable VAT paid in previous related transactions leading up to the export. Insufficient documentation may result in the loss of the right to a VAT reimbursement [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
Standard and reduced rates by country
Although VAT is charged throughout the EU, each member country is responsible for setting its own rates. It is recommended to check the latest rates with your local VAT office [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
There are various types of VAT rates:
- Standard rate: Each EU country applies a standard rate to most goods and services. This rate cannot be less than 15% [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
- Reduced rate: One or two reduced rates may be applied to specific goods and services, based on Annex III of the VAT Directive. In most cases, these do not apply to electronically supplied services. Reduced rates cannot be less than 5% [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
- Special rates: Some EU countries apply special VAT rates, which were originally transitional arrangements from before the Single Market came into force on 1 January 1993. These include:
- Super-reduced rates: Less than 5%, applied to a limited list of goods and services in certain EU countries [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
- Zero rates: Consumers pay no VAT, but businesses retain the right to deduct VAT paid on related purchases [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
- Parking rates (or intermediary rates): Applied by some EU countries to goods and services not included in Annex III of the VAT Directive. These rates must be no lower than 12% [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
For a full overview of categories related to each VAT rate, you can refer to the Taxes in Europe database [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm]. This database also provides information on VAT rates applicable for specific regions, such as the Azores Autonomous Region or the Canary Islands [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
Below is a table of VAT rates applied in EU member countries (as of the source's publication):
| Country code | Member State | Standard rate | Reduced rate | Super reduced rate | Parking rate |
|---|---|---|---|---|---|
| AT | Austria | 20 | 10 / 13 | - | 13 |
| BE | Belgium | 21 | 6 / 12 | - | 12 |
| BG | Bulgaria | 20 | 9 | - | - |
| CY | Cyprus | 19 | 5 / 9 | - | - |
| CZ | Czechia | 21 | 12 / 0 | - | - |
| DE | Germany | 19 | 7 | - | - |
| DK | Denmark | 25 | 0 | - | - |
| EE | Estonia | 24 | 9 | - | - |
| EL | Greece | 24 | 6 / 13 | - | - |
| ES | Spain | 21 | 10 | - | - |
| FI | Finland | 25.5 | 10 / 14 | - | - |
| FR | France | 20 | 5.5 / 10 | 2.1 | - |
| HR | Croatia | 25 | 5 / 13 | - | - |
| HU | Hungary | 27 | 5 / 18 | - | - |
| IE | Ireland | 23 | 9 / 13.5 | 4.8 | - |
| IT | Italy | 22 | 5 / 10 | 4 | - |
| LT | Lithuania | 21 | 5 / 9 | - | - |
| LU | Luxembourg | 17 | 8 | 3 | 14 |
| LV | Latvia | 21 | 5 / 12 | - | - |
| MT | Malta | 18 | 5 / 7 | - | - |
| NL | Netherlands | 21 | 9 | - | - |
| PL | Poland | 23 | 5 / 8 | - | - |
| PT | Portugal | 23 | 6 / 13 | - | 13 |
| RO | Romania | 21 | 11 | - | - |
| SE | Sweden | 25 | 6 / 12 | - | - |
| SI | Slovenia | 22 | 5 / 9.5 | - | - |
| SK | Slovakia | 23 | 5 / 19 | - | - |
Cross-border B2B and B2C rules
The provided sources offer general information on where VAT is charged for goods consumed within the EU and services carried out in the EU, and for exports outside the EU. However, they do not contain detailed specific rules for cross-border B2B (Business-to-Business) and B2C (Business-to-Consumer) transactions within the EU, such as reverse charge mechanisms or specific rules for digital services. The EU VAT One Stop Shop (OSS) is mentioned as a related topic, but its rules are not elaborated upon in the provided content [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].
VAT registration thresholds
The provided sources do not contain information regarding VAT registration thresholds for businesses in EU member states.
Invoicing rules under EU VAT Directive
The provided sources do not contain information on specific invoicing rules under the EU VAT Directive. The linked source for "VAT invoicing rules" is an empty page [https://europa.eu/youreurope/business/taxation/vat/vat-invoicing-rules/index_en.htm].
Recent changes and upcoming reforms
The provided sources do not contain specific information on recent changes or upcoming reforms to EU VAT rules. They note that special rates were originally intended as transitional arrangements to be phased out, but do not detail any current or planned reforms in this area [https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_en.htm].