Revealed: Countries with the highest VAT rates

The GCC states are currently gearing up to introduce a region-wide value added tax (VAT) from the start of 2018.

Set to be imposed at rate of 5 per cent, VAT is hoped to boost government revenues and help the Gulf states diversify their economies.

A recent report by EY stated that VAT will add more than $25bn of revenues per annum for the six GCC countries.

VAT will allow the GCC countries to also increase infrastructure investments, it said.

Read more: VAT to generate $25bn in annual revenues for GCC countries

In terms of implementation, each member state is expected to issue its own national VAT tax legislation based on the agreed common principles.

The UAE has already confirmed that around 100 items including essentials such as food, education and healthcare will be exempt from the tax.

Also read: How to get started on VAT in the Gulf

VAT in the UAE: Who will feel the biggest pinch?

While businesses and consumers are certain to feel an impact from the new tax, the rate at which it is being introduced is quite low compared to several other countries.

Countries with the highest VAT rates worldwide

(Data from EY. The standard VAT rate applies to all supplies of goods and services, unless a specific rule provides for a reduced rate or exemption.)

1. Hungary

Standard VAT rate: 27%

Reduced rates: 5% and 18%

Goods and services taxable at 5 per cent include: Human medicines and certain medical products, books (on paper), fresh milk, meat, and eggs

Goods and services taxable at 18 per cent include: Basic foodstuff, hotel services, and entrance fees to certain open-air public music festivals

From January 1 2018, the VAT rate applicable to catered meals and nonalcoholic beverages made on the spot is scheduled to decrease from 18 per cent to 5 per cent.

Goods and services exempt (without input VAT credit) include: Financial services, insurance, public postal services, approved education, lease of property, sale of securities, sale or lease of land, human medical care, and folk arts and crafts

2. Croatia

Standard VAT rate: 25%

Reduced rates: 5% and 13%

Goods and services taxable at 5 per cent include: All types of bread, all types of milk, books containing professional, scientific, artistic, cultural and educational content, drugs on doctors’ prescriptions and authorised by relevant agency, medical products, implants and other orthopedic devices, cinema tickets, scientific magazines, and newspapers and magazines published daily unless they are used for advertising purposes

Goods and services taxable at 13 per cent include: Accommodation services in all types of the listed commercial catering facilities and agency commission services for the services, daily and periodic newspapers and magazines printed on paper that, in their entirety or mainly, contain advertisements or serve advertising purposes, oils and fats for human consumption, car seats, baby food and processed grain food for infants and small children, supply of water, with the exception of water sold in bottles or any other packaging, white sugar produced from sugar cane or sugar beet, concert tickets, art and cultural magazines, electricity supply to another supplier or end-user, including related fees, public service of collecting mixed municipal waste, biodegradable municipal waste and separate waste collection, urns and coffins, seedlings and seeds, fertilisers and pesticides and other agrochemical products, and animal food – excluding food for pets

Goods and services exempt include: Public interest activities, postal service, hospital services and health care services, social care services, financial services, insurance transactions, and real estate transactions

3. Sweden

Standard VAT rate: 25%

Reduced rates: 6% and 12%

Goods and services taxable at 6 per cent include: Books and newspapers, copyrights and artistic rights, cultural services (apart from cinema services, which are taxed at the standard rate), and passenger transport

Goods and services taxable at 12 per cent include: Foodstuff, hotel accommodation, restaurant and catering services, reparation of bicycles, shoes, leather goods, clothing and household textiles

Goods and services exempt include: Immovable property, medical services, finance, insurance, and pharmaceutical supplies (exempt with credit)

4. Denmark

Standard VAT rate: 25%

Zero rate (0%)

Goods and services taxable at zero rate include: Newspapers, supplies to ships, supplies of gold to the Danish National Bank

Goods and services exempt include: Medical services, education, financial services, insurance and re-insurance, supplies made by writers, composers and performing artists, cultural services, transport of passengers, investment gold, and leasing of real estate

5. Norway

Standard VAT rate: 25%

Reduced rates: 10% (from January 1 2016) and 15%

Zero rate (0%)

Goods and services taxable at zero per cent include: Exports, supplies to foreign ships, and aircraft and ships involved in foreign trade, books and newspapers (includes e-newspapers and e-journals), transfer of a business as a going concern, and international transportation services (goods and passengers)

Services taxable at 10 per cent include: Domestic passenger transportation services (excluding the leasing of vehicles as such), television licenses, hotel accommodation, museums, amusement parks, galleries, and bigger sport events

Goods and services taxable at 15 per cent include: Food (excluding alcohol and tobacco, and supplies in restaurants)

Goods and services exempt include: Financial services, insurance, lease of residential property, medical services, educational services, real estate transactions, and specified cultural and sporting events

6. Finland

Standard VAT rate: 24%

Reduced rates: 10% and 14%

Zero rate (0%)

Goods and services taxable at zero per cent include: Exports of goods

Goods and services taxable at 10 per cent include: Cinema, sporting services, books, medicine, passenger transport, accommodation, compensation from copyrights received by a copyright organisation that represents the holders, and newspapers and periodicals sold by subscription for a minimum of one month

Goods and services taxable at 14 per cent include: Most foodstuff including restaurant and catering services (food served at restaurants), animal feed, and drinking water

Goods and services exempt include: Land and buildings, financial transactions, insurance, education (as defined by law), health and welfare, transfers of copyright ownership, and universal postal services

7. Greece

In Greece, the VAT rate depends on where the supply is made.

Standard VAT rate: 24%

Reduced rates: 6% and 13%

For islands belonging to the Prefectures of Evros, Lesvos, Chios, Samos and Dodecanese – with the exception of Rhodes and Karpathos, the following rates apply –

Standard VAT rate: 16%

Reduced rates: 4% and 9%

Goods and services taxable at 6 per cent include: Books, newspapers, magazines, and theatre tickets

Goods and services taxable at 13 per cent include: Hotel accommodation services

Goods and services exempt include: Postal services, finance, insurance, sales and rental of immovable property, medical services supplied by public law and other not-for-profit organisations, and healthcare

8. Iceland

Standard VAT rate: 24%

Reduced rate: 11%

Zero rate (0%)

Goods and services taxable at zero per cent include: Export of goods and services, supplies delivered for use on board vessels on international journeys, sale and leasing of aircraft and ships, shipbuilding along with repair-and-maintenance work on ships and aircraft and their fixed equipment, design, planning and other comparable services related to construction and other real property abroad, contractual payments from the Treasury related to the production of milk and sheep farming, sales of services to foreign fishing vessels landing fish in Iceland, sales of services to parties neither domiciled nor having a venue of operation in Iceland, and transportation of goods between countries or within Iceland

Services taxable at 11 per cent include: Radio licenses, rental of hotel rooms, guest rooms and other accommodation, newspapers, periodicals and books, geothermal hot water, electricity and fuel oil used for heating, most food-related items (including alcoholic beverages), CDs, records, magnetic tapes and other similar means of music recordings, access to road facilities, condoms, reusable diapers and diaper lining, services of travel agents, transportation of passengers, whether by land, air or sea, including coaches and bus trips (but transportation of passengers to and from the country is considered granted abroad and such services are exempt), and admission to spas and saunas

Goods and services exempt include: Financial services, insurance, lease of residential property, medical services, social services, educational services, real estate transactions, specified cultural and sporting events, public transport, postal services, lotteries and betting pools, and funeral services

9. Ireland

Standard VAT rate: 23%

Reduced rates: 9% and 13.5%

Zero rate (0%)

Goods and services taxable at zero per cent include: Books, most foodstuff (excluding confectionery), oral medicine, exports, children’s clothing and footwear, and goods and services supplied to frequent exporters under the “VAT 56 Scheme”

Goods and services taxable at 9 per cent include: Newspapers and magazines, holiday accommodation, and restaurant and catering services

Goods and services taxable at 13.5 per cent include: Electricity, repair, cleaning and maintenance services, developed immovable property, and building services

Goods and services exempt include: Postal services, finance, insurance, and leasing of immovable property (unless option to tax exercised by landlord)

10. Poland

Standard VAT rate: 23%

Reduced rates: 5% and 8%

Zero rate (0%)

Goods and services taxable at zero per cent include: Exports, intra-community supplies of goods, supplies of certain sailing vessels, international transport and related services, supplies of computer equipment to educational institutions

Goods and services taxed at 5 per cent include: Certain unprocessed basic foodstuff, certain agricultural and forestry products, and books and certain magazines

Goods and services taxed at 8 per cent include: Musical instruments, certain foodstuff, handicraft products, books, newspapers and magazines, maps, hotel services, certain entertainment services, passenger transport, travel services, medical products, supply of water, certain services related to agriculture, other services related to recreation – solely within the scope of admission, and supply, construction, repairs and reconstructions of buildings classified as “social housing”

Goods and services exempt include: Financial services (with exceptions), supply of real estate (with option to tax), healthcare services, social welfare services, public postal services, education, lease of residential property, cultural and sporting events (with exceptions), services connected with science, dental engineering, and betting, gaming and lotteries

11. Portugal

Standard VAT rate: 23%

Intermediate rate: 13%

Reduced rate: 6%

In the autonomous region of Madeira, the following rates apply –

Standard VAT rate: 22%

Intermediate rate: 12%

Reduced rate: 5%

In the autonomous region of Azores, the following rates apply –

Standard VAT rate: 18%

Intermediate rate: 9%

Reduced rate: 4%

Goods and services taxable at 6 per cent (5 per cent in Madeira and 4 per cent in the Azores) include: Basic foodstuff, books and newspapers, pharmaceuticals, medical equipment, passenger transport, and hotel accommodation

Goods and services taxable at 13 per cent (12 per cent in Madeira and 9 per cent in Azores) include: Canned meat and fish, fuel and coloured oil marked with government-approved additives, and admission to music and dance shows, theaters, cinemas, bullfighting and circuses

Goods and services exempt include: Leasing or letting of immovable property, medical services, financial services, insurance, copyrights by authors, and training provided by public sector institutions