Value Added Tax (VAT) Rates
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VAT or Value added tax was first introduced by Maurice Laure, a French economist and the joint director of the French tax authority in 1954. The system of VAT taxation was made effective from April 10 in 1954. Though this tax system was first applied in France, it was soon adopted by a number of other countries.
VAT, an indirect tax, is levied on value addition of products at every stage of production. From raw materials to the final product, at every stage, value is added to the goods and services. Initiated in France, today VAT is widely used as a method of taxation in most of the European countries.
VAT rates are decided on the basis of the main rules formed by European Union. All the member states of the European Union follow these rules for deciding over the VAT rate to be charged at every stage of production of goods. The three main rules for determination of VAT rate are:
- The standard rate of VAT imposed on goods and services, on which this tax is imposed, is a minimum of 15%.
- Members of the European Union can apply maximum of two reduced rates of VAT, which should not be less than 5%.
- There is a provision for the members of the EU, where, under certain conditions, countries may impose reduced VAT rate to certain services.
There are generally three different rates of VAT, which can be charged on goods and services. The standard VAT rate is 17.5%. For particular goods and services, there is a reduced rate of 5%. There are also some products, which are exempt from VAT, for which 0% VAT rate is imposed. However, the actual VAT rates levied on products vary from one country to other. The VAT authorities of the countries decide on the rates to be imposed on different goods and services. In addition, there are also certain rules for specific products and services.
VAT is known by various local names in different countries. VAT rates of the some of the member countries of the European Union and the local names used for this taxation system in those countries are mentioned below:
Country
VAT Rate
Name
Standard
Reduced
Denmark
25%
none
Merværdiafgift
Finland
22%
17% or 8%
Arvonlisavero
Mervardesskatt
Germany
19%
7%
Mehrwertsteuer/Umsatzsteuer
France
19.6%
5.5% or 2.1%
Taxe sur la valeur ajoutee
Ireland
21%
13.5%, 4.8% or 0%
Value Added Tax (English)
Cain Bhreisluacha (Irish Gaelic)
Italy
20%
10%, 6%, or 4%
Imposta sul Valore Aggiunto
Netherlands
19%
6% or 0%
Belasting toegevoegde waarde
Portugal
20%
12% or 5%
Imposto sobre o Valor Acrescentado
Spain
16%
7% or 4%
Impuesto sobre el valor añadido
Sweden
25%
12% or 6%
Mervardesskatt
United Kingdom
17.5%
5% or 0%
Value Added Tax
Poland
22%
7%, 3% or 0%
Podatek od towarow i uslug
Apart from the European Union member states, there are also a number of countries across the world, where VAT has been introduced to solve various problems related to the sales tax system. In most of these countries, variations of VAT are imposed on value addition on goods and services. However, in India, VAT has been introduced with the aim of replacing the system of sales tax. The following table shows VAT rates of some of the countries across the globe, which are not members of the European Union:
Country
VAT Rate
Name
Standard
Reduced
Argentina
21%
10.5% or 0%
Impuesto al Valor Agregado
Canada
5%
4.5%
Goods and Services Tax , Harmonized Sales Tax
Croatia
22%
10%
Porez na dodanu vrijednost
Iceland
24.5%
7%
Virdisaukaskattur
India
12.5%
4%, 1%, or 0%
Value Added Tax
Mexico
15%
0%
Impuesto al Valor Agregado
Russia
18%
10% or 0%
Nalog na dobavlennuyu stoimost
People’s Republic of China
17%
6% or 3%
Zeng zhi shui
Uruguay
22%
10%
Impuesto al Valor Agregado
Switzerland
7.6%
3.6% or 2.4%
Mehrwertsteuer, Taxe sur la valeur ajoutee, Imposta sul valore aggiunto, Taglia sin la Plivalur
Norway
25%
14% or 8%
Merverdiavgift or meirverdiavgift (informally moms )
South Africa
14%
0%
Belasting op Toegevoegde Waarde , Valued Added Tax
