The world of taxation is constantly changing, and for every rule of tax, one can find an exception. It is especially true to VAT regulation. In this article, 1StopVAT will answer some of the most frequent questions about the non-standard VAT rates and give an overview of the VAT rates and some odd deviations in VAT percentage.
The UK VAT rate applied to most economic activities (standard VAT) is 20%. The current UK VAT rate was confirmed in 2011. Before then, VAT percentage UK businesses had to charge was 17.5%. However, there are several kinds of reduced UK VAT rates; they include 10%, 5% and 0% rates.
Books and newspapers are subject to zero rated VAT. Other businesses that charge zero rated VAT include motorcycle helmet and children‘s clothing sellers. Interestingly, a standard rate of 20% applies to electronic publications such as e-books, digital magazines and newspapers.
Generally, the VAT rate UK food producers apply is zero. However, some of the products are standard rated for various reasons. Among these products are alcoholic beverages, catering, confectionery, crisps, hot food and take-aways, ice cream, soft drinks, and some others. These exceptions make the VAT UK rate seem a little tricky. For example, biscuits are zero-rated unless they are covered in chocolate – then they become a confectionery item. At the same time, edible cake decorations that are typically made from sugar are subject to zero-rated VAT.
Until March 2021, a VAT percentage cut applies to the hospitality businesses in the UK. Previously, VAT rate UK hotels and similar establishments had to charge was standard – 20%. As a COVID-19 relief measure, current VAT rate UK hospitality and tourism sectors need to pay was lowered to 5%.
Health services, provided by certificated specialists such as doctors, opticians or other health professionals, are subject to a VAT exemption in the UK. VAT exemption also is applied to medical treatments provided by hospitals, hospices, nursing homes.
VAT rates vary across countries in Europe, yet the EU issues VAT directives and sets general VAT rules. The minimum standard for VAT amount in the continent is set by the EU and is currently not lower than 15%. The EU allows having not more than two reduced VAT rates, not lower than 5%. This rule does not apply to the VAT rates that the countries had in place before the directive was implemented.
Even though Norway does not belong to the EU, it is also one of the countries that adopted VAT as its sales tax. The standard VAT rate in Norway is 25%, and food is subject to a reduced 15% VAT rate. The country had reduced the current VAT rate to 6% on passenger transport, cultural and sports activities and the hospitality sector before this decision, the VAT rate on these economic activities before was 12%.
To help enterprises cope with COVID-19 economic shock, Ireland has cut its standard VAT rate from 23% to 21%. Its current rate of VAT is effective from 1 September 2020 until 28 March 2021. The reduced VAT rate for hospitality services in the country was 13.5% and is reduced to 9% until the end of 2021. Another unusual VAT rate applied in Ireland is levied on livestock for meat and some agriculture supplies. This rate accounts for 4.6% of the sale value.
The VAT rates applied to hotels and tourism services vary across the European countries. However, most European countries that have lowered the VAT rates to the hospitality sector during COVID-19 had applied reduced VAT to these businesses prior to the pandemic. The current VAT rate for hospitality and tourism in Germany is 5% (2% drop from 7% prior to the pandemic). Austria and Belgium have cut half of the VAT rate to hospitality enterprises and currently charges 5% (from 10% previously) and 6% (from 12% previously) respectively.