Value-added tax

Implementation

VAT can be accounts-based or invoice-based. All VAT-collecting countries except Japan use the invoice method.

Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates the amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax). The difference between output tax and input tax is the amount paid to the government (or refunded, in the case of a negative amount).

Using accounts, the tax is calculated as a percentage of the difference between sales and purchases from taxed accounts.

Incentives

VAT provides an incentive for businesses to register and keep invoices, and it does this in the form of zero-rated goods and VAT exemption on goods not resold. Through registration, a business documents its purchases, making them eligible for a VAT credit.

The main benefits of VAT are that in relation to many other forms of taxation, it does not distort firms' production decisions, it is difficult to evade, and it generates a substantial amount of revenue.

Comparison with sales tax

Three examples below demonstrate the chain of transactions between the raw materials producer and the final consumer, in which

1. the government levies no tax
2. the government levies sales tax
3. the government levies a Value-Added Tax.

Compliance

One primary reason for the institution of a VAT versus sales tax is to ensure compliance. Because sales tax is only submitted at the final sale to the consumer, the government has little information to verify that a sale has been made or at what price, making enforcement difficult. The retailer and consumer have an incentive to evade the tax with little risk of discovery. With any transaction, the seller is financially motivated to assume the buyer is an intermediate, not a consumer (and therefore, not subject to the sales tax), even if this may result in illegal tax evasion.

By comparison, with VAT every transaction is reported to the government (either through a submission of tax, a reimbursement claim, or both), a trail of information is created for government which helps motivate compliance and facilitate any potential audit. The materials producer, manufacturer, and retailer all know that the others down the chain will submit reimbursement claims, so a failure to report the transaction and pay the tax is likely to draw attention from authorities. Even if retailers evade charging the VAT from the consumer, the government still receives the income at prior stages.

On the contrary, if a seller accidentally charge sales tax to an intermediate buyer, the end price to the consumer will increase.

Business structure

VAT has no effect on how businesses organize, because the same amount of tax is collected regardless of how many times goods change hands before arriving at the ultimate consumer. By contrast, sales taxes, when collected on intermediate transactions in addition to final consumption, encourage businesses to vertically integrate to reduce the number of transactions and thereby reduce the amount of tax paid.

Because of the difficulty of exempting intermediate transactions in a sales tax, VAT has been gaining favor over traditional sales taxes.

However, it is uncommon for sales taxes to be collected at every stage, as it is only levied as a final tax on the consumer, not the reseller.

Governance structure

VAT is collected at the national level. In countries such as India and the United States, sales tax is collected at the point of sale by the local jurisdiction, leading them to prefer the latter method.

Accounting

The main disadvantage of VAT is the extra accounting required by those in the supply chain. However, payment of VAT is made simpler when the VAT system has few, if any, exemptions (such as with GST in New Zealand).

Effects

Regressivity

VAT has been criticized by opponents as a regressive tax, meaning that the poor pay more, as a percentage of their income, relative to the wealthier individuals, given the higher marginal propensity to consume among the poor.

Defenders reply that relating taxation levels to income is an arbitrary standard and that the VAT is in fact a proportional tax. An OECD study found that VAT could even be slightly progressive. VAT's effective regressivity can be reduced by applying a lower rate to products that are more likely to be consumed by the poor. Some countries compensate by implementing transfer payments targeted to the poor.

Deadweight loss

The incidence of VAT may not fall entirely on consumers as traders tend to absorb VAT so as to maintain sales volumes. Conversely, not all cuts in VAT are passed on in lower prices. VAT consequently leads to a deadweight loss if cutting prices pushes a business below the margin of profitability. The effect can be seen when VAT is cut or abolished. Sweden reduced VAT on restaurant meals from 25% to 12%, creating 11,000 additional jobs.

Churning

Because VAT is included in the price index to which state benefits such as pensions and welfare payments are linked in some countries, as well as public sector pay, some of the apparent revenue is churned – i.e. taxpayers are given the money to pay the tax, reducing net revenue.

Business cashflow

Refund delays by the tax administration can damage businesses.

Compliance costs

Compliance costs are seen as a burden on business. In the UK, compliance costs for VAT have been estimated to be about 4% of the yield, with greater impacts on smaller businesses.

Under a sales tax system, only businesses selling to the end-user are required to collect tax and bear the accounting cost of collecting the tax. Under VAT, manufacturers and wholesale companies also incur accounting expenses to handle the additional paperwork required for collecting VAT, increasing overhead costs and prices.

Fraud

VAT offers distinctive opportunities for evasion and fraud, especially through abuse of the credit and refund mechanism. VAT overclaim fraud reached as high as 34% in Romania.

Exports are generally zero-rated, creating opportunity for fraud. In Europe, the main source of problems is carousel fraud. This fraud originated in the 1970s in the Benelux countries. VAT fraud then became a major problem in the UK. Similar fraud possibilities exist inside a country. To avoid this, countries such as Sweden hold the major owner of a limited company personally responsible.

Trade effects

If a county's exported goods are exempt from domestic VAT (zero-rated) or VAT rebated, this can motivate an increase in the export of goods.

A country's national VAT may be seen as a tariff on imported goods. The American Manufacturing Trade Action Coalition in the United States consider VAT charges on US products when VAT rebates are offered for products from other countries to be an unfair trade practice. AMTAC claims that so-called "border tax disadvantage" is the greatest contributing factor to the US current account deficit, and estimated this disadvantage to US producers and service providers to be $518 billion in 2008 alone. US politicians such as congressman Bill Pascrell, advocate either changing WTO rules relating to VAT or rebating VAT charged on US exporters.

A business tax rebate for exports was proposed in the 2016 GOP tax reform policy paper. The assertion that this "border adjustment" would be compatible with the rules of the WTO is controversial; it was alleged that the proposed tax would favour domestically produced goods as they would be taxed less than imports, to a degree varying across sectors. For example, the wage component of the cost of domestically produced goods would not be taxed.

A 2021 study reported that value-added taxes within the EU were unlikely to distort trade flows.

Around the world

Armenia

The VAT rate is 20%. However, the expanded application is zero VAT for many operations and transactions. That zero VAT is the source of controversies between its trading partners, mainly Russia, which is against the zero VAT and promotes wider use of tax credits. VAT is replaced with fixed payments, which are utilized for many taxpayers, operations, and transactions. Legislation is based largely on the EU VAT Directive's principles.

The system is input-output based. Producers are allowed to subtract VAT on their inputs from the VAT they charge on their outputs and report the difference. VAT is purchased quarterly. An exception occurs for taxpayers who state monthly payments. VAT is disbursed to the state's budget on the 20th day of the month after the tax period. The law took effect on 1 January 2022.

Australia

The goods and services tax (GST) is a VAT introduced in Australia in 2000. Revenue is redistributed to the states and territories via the Commonwealth Grants Commission process. This works as a program of horizontal fiscal equalisation. The rate is set at 10%, although many domestically consumed items are effectively zero-rated (GST-free) such as fresh food, education, health services, certain medical products, as well as government charges and fees that are effectively taxes.

Bangladesh

VAT was introduced in 1991, replacing sales tax and most excise duties. The Value Added Tax Act, 1991 triggered VAT starting on 10 July 1991, which is observed as National VAT Day. VAT became the largest source of government revenue, totaling about 56%. The standard rate is 15%. Export is zero rated. Several reduced rates, locally called Truncated Rates, apply to service sectors and range from 1.5% to 10%. The Value Added Tax and Supplementary Duty Act of 2012 automated administration.

The National Board of Revenue (NBR) administers VAT. Other rules and acts include Development Surcharge and Levy (Imposition and Collection) Act, 2015; and Value Added Tax and Supplementary Duty Rules, 2016. Anyone who collects VAT becomes a VAT Trustee if they: register and collect a Business Identification Number (BIN) from the NBR; submit VAT returns on time; offer VAT receipts; store all cash-memos; and use the VAT rebate system responsibly. VAT Mentors work in the VAT or Customs department and deal with trustees. The VAT rate is a flat 15%.

Barbados

VAT was introduced on 1 January 1997 and replaced 11 other taxes. The original rate of 15% was increased to 17.5% in 2011. The rate on restaurant and hotel accommodations is between 10% and 15% while certain foods and goods are zero-rated. The revenue is collected by the Barbados Revenue Authority.

Bulgaria

VAT was 20% as of 2023. A reduced rate of 9% applies to baby foods and hygiene products, as well as on books. A permanent rate of 9% applies to physical or electronic periodicals, such as newspapers and magazines.

Canada

Goods and Services Tax (GST) is a national sales tax introduced in 1991 at a rate of 7%, later reduced to 5%. A Harmonized Sales Tax (HST) that combines the GST and provincial sales tax, is collected in New Brunswick (15%), Newfoundland (15%), Nova Scotia (14%), Ontario (13%) and Prince Edward Island (15%), while British Columbia had a 12% HST until 2013. Quebec has a de facto 14.975% HST: it follows the same rules as the GST, and both are collected by Revenu Québec.

Advertised and posted prices generally exclude taxes, which are calculated at the time of payment; common exceptions are motor fuels, the posted prices for which include sales and excise taxes, and items in vending machines as well as alcohol in monopoly stores. Basic groceries, prescription drugs, inward/outbound transportation and medical devices are zero-rated. Other provinces that do not have a HST may have a Provincial Sales Tax (PST), which are collected in British Columbia (7%), Manitoba (7%) and Saskatchewan (6%). Alberta and all three territories do not collect either a HST or PST.

Chile

VAT was introduced in Chile in 1974 under Decreto Ley 825. From 1998 there was implemented a 18% tax. Since October 2003, the standard VAT rate has been 19%, applying to the majority of goods and some services. However certain items have been subjected to additional tax, for instance, alcoholic beverages (between 20.5= – 31.5% for fermented to distilled products), jewellery (15%), pyrotechnic items (50% or more for the first sale or import) or soft drinks with high sugar (18%). As of 2023, the VAT tax includes majority of services excluding Education, Health and Transport, as well as taxpayers issuing fee receipts. This tax makes the 41.2% of the total revenue of the country.

China

VAT produces the largest share of China's tax revenue. In 2019, VAT accounted for 40% of the total tax revenue.

In 1984 the State Council announced that China would begin collecting VAT. For a decade, it was imposed only on certain categories of goods and at differing rates. In 1994, VAT became universally imposed on production, wholesale, retain, and importation of all goods.

In 2016, business tax was replaced with VAT nationwide. VAT's significance to China's tax revenues increased drastically after this.

Czech Republic

In 1993, a standard rate of 23% and a reduced rate of 5% for non-alcoholic beverages, sewerage, heat, and public transport was introduced. In 2015, rates were revised to 21% for the standard rate, and 15% and 10% reduced rates. The lowest reduced rate primarily targeted baby food, medicines, vaccines, books, and music shops, while maintaining a similar redistribution of goods and services for the other rates.

In 2024, a law aimed at reducing the national debt featured return to two rates: a standard rate of 21% and a reduced rate of 12%. Goods and services were redistributed among different tax rates.

There was only one service that shifted from the standard rate to the reduced rate and that was non-regular land passenger bus services. These are not taxi services, which apply a VAT rate of 21%. Books and printed materials, including electronic books, were zero rated.

Several services were moved from reduced rates to the standard rate. Examples include hairdressers and barbers, bicycle repairs, footwear and clothing repairs, freelance journalists and models, cleaning services, and municipal waste.

European Union

The European Union VAT is mandatory for member states of the European Union. The EU VAT asks where supply and consumption occurs, which determines which state collects VAT and at what rate.

Each state must comply with EU VAT law, which requires a minimum standard rate of 15% and one or two reduced rates not to be below 5%. Some EU members have a 0% VAT rate on certain items; these states agreed this as part of their accession (for example, newspapers and certain magazines in Belgium). Certain goods and services must be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other items are exempt from VAT by default, but states may opt to charge VAT on them (such as land and certain financial services). Luxembourg charges the lowest rate, 17%, and Hungary charges the highest rate, 27%. Only Denmark has no reduced rate.

Gulf Cooperation Council

The United Arab Emirates (UAE) on 1 January 2018 implemented VAT. For companies whose annual revenues exceed $102,000 (Dhs 375,000), registration is mandatory. GCC countries agreed to an introductory rate of 5%. Saudi Arabia's VAT system uses a 15% rate.

Hungary

Hungary's standard VAT rate is 27%, the highest in the European Union. Lower rates of 18%, 5%, and 0% apply to certain goods and services.

India

VAT was introduced on 1 April 2005. Of the then 28 states, eight did not immediately introduce VAT. Rates were 5% and 14.5%. Tamil Nadu introduced VAT on 1 January 2007. Under the BJP government, it was replaced by a national Goods and Services Tax (GST) according to the One Hundred and First Amendment of the Constitution of India.

Iran (Islamic Republic Of)

Under the Iranian Islamic Resistive economy VAT is universally collected, paid twice 12% by consumer at Point of sale terminals purchases and also by the producers/manufacturers paid electronically at once, around 2% of government VAT profit goes to food electronic coupon stamps National Credit Network program, during Iranian economic crisis in December 2025 in the 2026 fiscal budget it was raised by 3%.

Indonesia

Per 1 January 2025, maximum Goods and Services Tax (GST) is levied at the rate of 12% at point of sale. Sales and services tax are exempt from cottage economies and industries.

A VAT rate of zero percent is applied to the following taxable events:

• export for taxable goods
• export for intangible taxable goods
• export for taxable services

VAT base on equivalent to the sale price/service fee or import/export value.

Italy

Value added tax or VAT, (in Italian Imposta sul valore aggiunto, or IVA) is a consumption tax charged at a standard rate of 22 percent, which came in on 1 July 2013 (previously 21 percent).

The first reduced VAT rate (10 percent) applies to water supplies, passenger transport, admission to cultural and sports events, hotels, restaurants and some foodstuff. The second reduced VAT rate (5 percent) applies to some foodstuff and social services. The super-reduced VAT rate (4 percent) applies to TV licenses, newspapers, periodicals, books and medical equipment for the disabled. A zero VAT rate (0 percent) applies to intra-community and international transport.

The filing deadline for VAT returns is 30 April of the next year.

Israel

Value-added tax (VAT) in Israel, is applied to most goods and services, including imported goods and services. From 1 January 2025 the standard rate was increased to 18% from 17%. It had been decreased to 17% from 18% on 1 October 2015. It had been raised from 16% to 17% on 1 September 2012, and to 18% on 2 June 2013.

Certain items, such as exported goods and the provision of certain services to non-residents are zero-rated. VAT on imported goods is levied on value plus customs duty, purchase tax and other levies.

Multinational companies that provide services to Israel through the Internet, such as Google and Facebook, must pay VAT.

Electronic filing of VAT is mandatory.

Japan

VAT, referred to as consumption tax, was implemented in Japan in 1989. Tax authorities debated VAT in the 1960s and 1970s but decided against it at the time.

The standard rate is 10%. Food, beverages, newspaper subscriptions with certain criteria and other necessities qualify for a rate of 8%. Transactions including land sales or lease, securities sales and the provision of public services are exempt.

Malaysia

The Goods and Services Tax (GST) is an abolished value-added tax in Malaysia. GST is levied on most transactions in the production process, but is refunded with exception of Blocked Input Tax, to all parties in the chain of production other than the final consumer.

The existing standard rate for GST effective from 1 April 2015 is 6%. Many domestically consumed items such as fresh foods, water and electricity are zero-rated, while some supplies such as education and health services are GST exempted.

After Pakatan Harapan won the 2018 Malaysian general election, GST was reduced to 0% on 1 June 2018. The then Government of Malaysia tabled the first reading of the Bill to repeal GST in Parliament on 31 July 2018 (Dewan Rakyat). GST was replaced with the Sales Tax and Service Tax starting 1 September 2018.

Mexico

The existing sales tax (Spanish: impuesto a las ventas) was replaced by VAT (Spanish: Impuesto al Valor Agregado, IVA) on 1 January 1980. As of 2010, the general VAT rate was 16%. This rate was applied all over Mexico except for border regions (i.e. the United States border, or Belize and Guatemala), where the rate was 11%. Books, food, and medicines are zero-rated. Some services such as medical care are zero-rated. In 2014 the favorable tax rate for border regions was eliminated and the rate increased to 16% across the country.

Nepal

Value Added Tax (VAT) is an indirect tax levied on the value creation or addition. The concept of VAT in Nepal was introduced in FY 2049/50 but the act was developed in BS 2050. VAT was implemented in 1998 and is the major source of government revenue. It is administered by the Inland Revenue Department of Nepal.

New Zealand

Goods and Services Tax (GST; Māori: Tāke hokohoko) is a value-added tax or consumption tax for goods and services consumed in New Zealand.

GST in New Zealand is designed to be a broad-based system with few exemptions, such as for rents collected on residential rental properties, donations, precious metals and financial services. It normally makes up around 30% of tax revenue in New Zealand.

The rate for GST, effective since 1 October 2010 is 15%. This 15% tax is applied to the final price of the product or service being purchased and goods and services are advertised as GST inclusive. Reduced rate GST (9%) applies to hotel accommodation on a long-term basis (longer than 4 weeks). Zero rate GST (0%) applies to exports and related services; land transactions; international transportation. Financial services, real estate and precious metals are also exempt.

Nordic countries

MOMS (Danish: merværdiafgift, formerly meromsætningsafgift), Norwegian: merverdiavgift (bokmål) or meirverdiavgift (nynorsk) (abbreviated MVA), Swedish: Mervärdes- och OMSättningsskatt (until the early 1970s labeled as OMS OMSättningsskatt only), Icelandic: virðisaukaskattur (abbreviated VSK), Faroese: meirvirðisgjald (abbreviated MVG) or Finnish: arvonlisävero (abbreviated ALV) are the Nordic terms for VAT. Like other countries' sales and VAT, it is an indirect tax.

Denmark has the highest VAT, alongside Norway, Sweden, and Croatia. VAT is generally applied at one rate, 25%, with few exceptions. Services such as public transport, health care, newspapers, rent (the lessor can voluntarily register as a VAT payer, except for residential premises), and travel agencies.

In Finland, the standard rate is 25.5%. A 14% rate is applied on groceries, animal feed, and restaurant and catering services. A 10% rate is applied on books, newspapers and magazines, pharmaceutical products, sports and fitness services, entrance fees to cultural, entertainment and sporting events, passenger transport services, accommodation services, and royalties for television and public radio activities. Åland, an autonomous area, is considered to be outside the EU VAT area, although its VAT rate is the same as for Finland. Goods brought from Åland to Finland or other EU countries are considered to be imports. This enables tax-free sales onboard passenger ships.

In Iceland, VAT is 24% for most goods and services. An 11% rate is applied for hotel and guesthouse stays, licence fees for radio stations (namely RÚV), newspapers and magazines, books; hot water, electricity and oil for heating houses, food for human consumption (but not alcoholic beverages), access to toll roads and music.

In Norway, the general rate is 25%, 15% on foodstuffs, and 12% on hotels and holiday homes, on some transport services, cinemas. Financial services, health services, social services and educational services, newspapers, books and periodicals are zero-rated. Svalbard has no VAT because of a clause in the Svalbard Treaty.

In Sweden, VAT is 25% for most goods and services, 12% for foods including restaurants, and hotels. It is 6% for printed matter, cultural services, and transport of private persons. Zero-rated services including public (but not private) education, health, dental care. Dance event tickets are 25%, concerts and stage shows are 6%, while some types of cultural events are 0%.

MOMS replaced OMS (Danish omsætningsafgift, Swedish omsättningsskatt) in 1967, which was a tax applied exclusively for retailers.

Philippines

The standard value-added tax (VAT) rate since 2006 is 12%, when Republic Act No. 9337 came into effect; previously, it had been 10% when it was first introduced by president Corazon Aquino in 1988 upon issuing Executive Order No. 273.

In 2018, the VAT threshold of annual sales was changed from ₱1,919,500 to ₱3,000,000 as a result of the passage of the Tax Reform for Inclusion and Acceleration (TRAIN) Law.

Poland

VAT was introduced in 1993. The standard rate is 23%. Items and services eligible for an 8% include certain food products, newspapers, goods and services related to agriculture, medicine, sport, and culture. The complete list is in Annex 3 to the VAT Act. A 5% applies to basic food items (such as meat, fruits, vegetables, dairy and bakery products), children's items, hygiene products, and books. Exported goods, international transport services, supply of specific computer hardware to educational institutions, vessels, and air transport are zero rated. Taxi services have flat-rate tax of 4%. Flat-rate farmers supplying agricultural goods to VAT taxable entities are eligible for a 7% refund.

Romania

Value-added tax (in Romanian Taxa pe valoarea adăugată, or TVA) in Romania is a consumption tax charged at a standard rate of 21%. A single reduced rate of 11% applies to most foodstuffs (alcoholic beverages excluded) and utilities.

Russia

The VAT rate is 20% with exemptions for some services (for example, medical care). VAT payers include organizations (industrial and financial, state and municipal enterprises, institutions, business partnerships, insurance companies and banks), enterprises with foreign investments, individual entrepreneurs, international associations, and foreign entities with operations in the Russian Federation, non-commercial organizations that conduct commercial activities, and those who move goods across the border of the Customs Union.

In September 2025 MinFin proposed to raise the VAT rate from 20% to 22% for 2026.

Singapore

Goods and Services Tax (GST) in Singapore is 9% levied on local sales, import of goods, as well as most supplies of goods and services. Exemptions are given for the sales and leases of residential properties, importation and local supply of investment precious metals and most financial services. Export of goods and international services are zero-rated. GST is also absorbed by the government for public healthcare services, such as at public hospitals and polyclinics.

Slovakia

The standard rate is 23%. A 5% rate primarily applies to essential goods such as (healthy) food, medicine, and books.

Spain

VAT (IVA in Spanish: impuesto sobre el valor añadido or impuesto sobre el valor agregado) is due on any supply of goods or services sold in Spain (mainland Spain and Balearic Islands only). The current normal rate is 21% which applies to all goods which do not qualify for a reduced rate or are exempt. There are two lower rates of 10% and 4%. The 10% rate is payable on most drinks, hotel services, and cultural events. The 4% rate is payable on food, books and medicines. The Spanish African territories of Ceuta, Melilla and the Canary Islands have other taxes equivalent to the VAT, but with lower tax rates An EU directive means that all countries of the European Union have VAT. All exempt goods and services are listed below.

• Education provided by the state
• Tutoring
• Sporting services
• Cultural services
• Insurance
• Postal stamps
• Artists, writers, and composers

As of January 1, 2013, new properties are taxed at a reduced rate of 10%. Second-hand properties are not subject to VAT, but a transfer tax, known as Impuestos Sobre Transmisiones Patrimoniales or ITP. The tax is levied by the autonomous regional governments and therefore varies by region. The rate varies from 6% to 8%.

South Africa

South Africa applies a standard VAT rate of 15%, with specific zero-rated and exempt items; recent case law has clarified the treatment of certain entertainment expenses for VAT input claims.

The VAT component of the tax revenue SARS collected in 2017/18 can be further broken down into Domestic VAT and Imported VAT, as per the table below:

Switzerland and Liechtenstein

The value added tax (VAT; Mehrwertsteuer / Taxe sur la valeur ajoutée / Imposta sul valore aggiunto) is one of the Confederation's principal sources of funding. It is levied at a rate of 8.1 percent on most commercial exchanges of goods and services. Certain exchanges are subject to a reduced VAT of 2.6 percent:

• Foodstuffs (except alcoholic beverages)
• Cattle, poultry, fish
• Seeds, living plants, cut flowers
• Grains
• Animal feed and fertilizer
• Medications
• Newspapers, magazines, books and other printed products without advertising character of the kinds to be stipulated by the Federal Council
• Services of radio and television companies (exception: the normal rate applies for services of a commercial nature)

A special rate of 3.8% is in use in the hotel industry. Yet other exchanges, including those of medical, educational and cultural services, are tax-exempt; as are goods delivered and services provided abroad. The party providing the service or delivering the goods is liable for the payment of the VAT, but the tax is usually passed on to the customer as part of the price.

In 2014 total revenue from VAT was nearly CHF 11 billion (short scale) on CHF 866 billion of taxable sales. In 2013 the revenue and sales were CHF 10.3 billion and 858 billion respectively.

Taiwan

VAT in Taiwan is 5%. It is levied on all goods and services. Exceptions include exports, vessels, aircraft used in international transportation, and deep-sea fishing boats.

Trinidad and Tobago

VAT is 12.5%.

Ukraine

Value added tax is levied on the supply of goods and service in Ukraine and on the import and export of goods and auxiliary services. Supplies to and from Crimea are treated as exports and imports for value added tax purposes. The standard VAT rate is 20% for domestic supplies and imported goods (including auxiliary services). A 7% rate applies to supplies of pharmaceuticals and healthcare products. Exported goods and auxiliary services are zero-rated. For VAT purposes, services that are included in the customs value of imported and exported goods are considered auxiliary services. Certain supplies are not subject to VAT, including: issues of securities; insurance services; reorganization of legal entities; transfers and returns of property under operating lease arrangements; currency exchange; and imports and exports with a custom value of less than 150 EUR. VAT-exempt supplies include published periodicals; student notebooks, textbooks, books and certain educational services; certain public transport services; the provision of software products (until January 1. 2023); and the provision of healthcare services by licensed institutions. Registration is required (for residents and non-residents) if value of taxable supplies of goods or services exceeds ₴1 million during any 12-month period. A legal entity may apply for voluntary registration if it has no VAT-able activities or if the volume of its VAT-able transactions is less than the registration threshold. Although not specifically provided for in the Tax Code, in practice a nonresident entity must register for Ukrainian VAT purposes via representative office (RO) and/or permanent establishment (PE) in Ukraine.

United Kingdom

The United Kingdom introduced VAT in 1973 after joining the EEC. The current standard rate for VAT in the United Kingdom since 2011 is 20%. Some goods and services have a reduced rate of 5% or are zero-rated (0%). Others may be exempt.

United States

In the United States no federal VAT is in effect. Instead, sales and use taxes are used in most states. However, two states have enacted a form of VAT in lieu of a business income tax:

• Michigan used a form of VAT known as the "Single Business Tax" (SBT) from 1975 until voter-initiated legislation repealed it, replaced by the Michigan Business Tax in 2008.
• Hawaii has a 4% General Excise Tax (GET) that is charged on gross business income. Individual counties add a .5% surcharge. Unlike a VAT, rebates are not available, such that items incur the tax each time they are (re)sold.

Puerto Rico replaced its 6% sales tax with a 10.5% VAT beginning 1 April 2016, leaving in place its 1% municipal sales and use tax. Materials imported for manufacturing are exempt.

Discussions about a federal VAT

Former 2020 Democratic presidential candidate Andrew Yang advocated for a national VAT in order to pay for his universal basic income proposal. A national subtraction-method VAT, often referred to as a "flat tax", has been repeatedly proposed as a replacement of the corporate income tax.

A border-adjustment tax (BAT) was proposed by the Republican Party in 2016.

Vietnam

All organizations and individuals producing and trading VAT taxable goods and services pay VAT, regardless of whether they have Vietnam-resident establishments.

Vietnam has three VAT rates: 0 percent, 5 percent and 10 percent. 10 percent is the standard rate.

A variety of goods and service transactions qualify for VAT exemption.

Tax rates

Examples by continent

European Union countries

Non-European Union countries

VAT-free countries and territories

As of January 2022, the countries and territories listed remained VAT-free.