From registering your business account to complying with legal requirements to finally selling your first item or service bundle, getting settled takes a lot of work. But when it comes to understanding VAT rates, it doesn’t have to be a hassle.
In this article, we delve into everything you need to know about VAT rates in Europe, how they work, a list of VAT rates in Europe by country, and some simple case examples to make it make sense.
Understanding VAT: The What and How
You may have already heard of the term, but what does it mean, and how is it applied to your goods and services? The VAT rate (Value-Added Tax) is a form of consumption tax that is, as the name suggests, determined by the value added to goods and services.
Companies don’t exactly pay for this; rather, customers pay them through the price of goods, which is then collected by companies, making it an indirect payment. The EU government requires businesses to report this.
The VAT rate applies to most goods and services bought or sold on the grounds of the European Union. It usually don’t apply to goods exported or services provided to customers abroad. Imports, however, are taxed to ensure a fair system for businesses within the EU market and promote equal competitiveness with suppliers abroad.
For instance, if a gentleman from Germany decides to buy a pair of loafers in Hungary, then the tax is paid to the Hungarian government at the applied rate (see table below for applicable VAT rates by country as of 2024).
Standard, Reduced and Parking VAT Rates Explained
- Standard/Normal VAT Rate: Applies to most goods and services and must be no lower than 15%, without maximum value.
- Reduced VAT Rate: The EU permits a maximum of two reduced VAT rates for goods and services under Annex III of the VAT Directive, where reduced rates must be no lower than 5%.
- Super Reduced VAT Rate: Only applicable to specific goods and services. In France, for example, specific medicines have a super-reduced level of 2.1%.
- Parking VAT Rate: They are also known as intermediate rates and are applied by some members of the EU for goods and services that don’t fall under Annex III of the VAT Directive. Parking VAT must be no lower than 12%.
VAT Rates in Europe by Country (2024)
| Country | Standard Rate | Parking Rate | Reduced Rate | Super Reduced Rate |
| Austria | 20% | 13% | 10% or 13% | – |
| Belgium | 21% | 12% | 6% or 12% | |
| Bulgaria | 20% | – | 9% | – |
| Croatia | 25% | – | 5% or 13% | – |
| Cyprus | 19% | – | 5% or 9% | – |
| Czech Republic | 21% | – | 12% | – |
| Denmark | 25% | – | – | – |
| Estonia | 22% | – | 9% | – |
| Finland | 24% | – | 10% or 14% | – |
| France | 20% | – | 5.5% or 10% | 2.1% |
| Germany | 19% | – | 7% | 10% |
| Greece | 24% | – | 6% or 13% | – |
| Hungary | 27% | – | 5% or 18% | – |
| Iceland | 24% | – | 11% | – |
| Ireland | 23% | 13.5% | 9% or 13.5% | 4.8% |
| Italy | 22% | – | 5% or 10% | 4% |
| Latvia | 21% | – | 5% or 12% | – |
| Luxembourg | 17% | 14% | 8% | 3% |
| Malta | 18% | – | 5% or 7% | – |
| Netherlands | 21% | – | 9% | – |
| Norway | 25% | – | 12% or 15% | – |
| Poland | 23% | – | 5% or 8% | – |
| Portugal | 23% | 13% | 6% or 13% | – |
| Romania | 19% | – | 5% or 9% | – |
| Slovakia | 20% | – | 10% | 5% |
| Slovenia | 22% | – | 5% or 9.5% | – |
| Spain | 21% | – | 10% | 4% |
| Sweden | 25% | – | 6% or 12% | – |
| Switzerland | 8.1% | – | 2.6% or 3.8% | – |
| Turkey | 20% | – | 10% | 1% |
| United Kingdom | 20% | – | 5% | – |
How Businesses Handle VAT?
Now that you understand the basic principles of VAT rates, here are some areas to pay attention to as you apply them in business.
Whether you are in B2B or B2C, VAT compliance is non-negotiable when it comes to operating business within the European Union. Though it can seem perplexing, it is crucial to grasp the fundamentals.
Marketplace: E-commerce and Sales
If your business (the seller) makes more than €10,000 in distance sales, which is the overall threshold in EU countries, you are obliged to apply the VAT rate of the country of delivery.
Case example: Say a German seller sold clothes for €100 to a Dane (from Denmark) customer. The applicable standard rate in Denmark is 25%. Hence, the German seller will invoice €125 to the Dane customer, which includes the €25 VAT. The German seller must then remit the €25 to the Denmark tax administration through the OSS or IOSS Single Window.
Note: If your business (seller) makes less than €10,000, you must apply the VAT in your country of establishment (i.e., if you’re based in Germany, you must apply the tax in Germany).
Local Sale in Another EU Country
A local sale is when your goods are sold in the EU country where they are stored. In this case, your business must apply the tax of the country from which you are making the sale.
Case example: You are a Spanish company that stores belts in Denmark and resells them to Danes who love your belt’s design and overall functionality. Since your belts remained on Denmark grounds, they are deemed a local sale.
So, the Spanish company has to obtain the added-value number in Denmark to invoice the VAT for your Danish customers. You must then apply the most updated VAT rate for the belts, which, in this case, is 25%. Lastly, you must file VAT returns in Denmark and remit to the Danish tax authorities.
It takes a bit of due diligence and regular revision, but once you get the basics, you’ll get a rhythm going for your daily business operations.
Manage your VAT with Ease
As we enter an increasingly global and digital economy, you must stay up to speed with recent regulations and solutions that will help streamline your business.
Knowing what and how it work is one piece of the puzzle of navigating a successful business in the EU, and you need all the help you can get. That is where Omega comes in.
Learn more about Omega Business Account today.
