What are VAT Tax Rates in Europe

by | Business

vat return

Starting a business is never a piece of cake. When it comes to starting a business in a foreign country, things get even more complicated. The thoughts of the business environment, future expenses, and of course taxes issues seem a never-ending nightmare. 

We understand the struggle to make your company tap into new markets and make it a prosperous entity. Therefore, we prepared a detailed Europe vat rates comparison in some of еру most popular European countries among entrepreneurs. Sounds intriguing! 

Fasten the seatbelts, make a tea to sip and something to snack on. We’re going to overview value added tax rates in Poland, Ireland, Romania, the Czech Republic, and Portugal to decide what destination offers the most “tasty” rates.

Source: Unsplash.com

Vat Rates in Poland

Poland Business Environment Overview

We’re opening this Europe VAT rates Comparison with Poland. A country in the Eastern Europe and a member of the European Economic Area (EEA), Poland is open for business. The country earned a reputation as a conducive place to do business in. As the website of the Republic of Poland claims, Poland is a CEE region leader and ranks above many countries in the Global Competitiveness Report 2019”, „Doing Business 2020”, and „Corruption Perception Index 2019”. [1]

Poland vat tax
Source: Unsplash.com

Things to Learn about Polish Vat Rate

VAT in Poland is known as Podatek od towarow i usaug (PTU). The country follows the EU VAT compliance but still sets its own VAT Rates.

There are certain rules imposed by authorities about who should register for Polish Value added tax. For business owners, VAT registration Poland is obligatory in several cases.

  1. The value of your sales overruns the threshold of PLN 200 000 in a fiscal year.
  2. If your sales in a fiscal year do not exceed the limit but you wish to waive the right for registration.
  3. Regardless of your sales if you supply new means of transport, building land, wholesale and retail, parts for motor vehicles and motorcycles. 
  4. You provide legal services, jewellery services, and debt recovery services.
  5. Your place of business is outside Poland.

See the full list of VAT-obliged businesses on this page. [2]

Europe VAT rates comparison – Recent Poland Vat Rate

Polish Vat payers fall into two categories depending on the vat rate they’re required to pay: standard and a reduced rate. What category covers your business? Let’s see in the table below.

Type of VATPoland VAT Rate 2021Subjects to Vat
Standard23%All goods and services except those covered by special VAT provisions.
Reduced8%Supply of passenger transport services,  pharmaceutical products and goods for the Social Housing Programme (no greater than 150 square meters)
Reduced5%Basic food, unprocessed food, books and journals
Reduced0%Exports of goods outside the European Union
Poland VAT rates comparison [3]

VAT Rates in Ireland

Ireland Business Environment Overview

The Republic of Ireland is a commonly known destination among entrepreneurs who want to expand sales in Europe. After Brexit, this is the only English-speaking EU member.

The country is waiting with open arms for both EEA residents and non-residents as well. The economic competitiveness of Ireland is confirmed by World Competitiveness Yearbook as well as thousands of successful stories of entrepreneurs. 

Key attractiveness factors of Ireland for businesses are the competitive taxation system, skills workforce, and high educational level.
Curious about how to set up an Irish business? Here is a full guide on how to register a company in Ireland.

Things to Learn about Vat in Ireland

Irish VAT is regulated by the Value-Added Tax Consolidation Act. In general, every accountable person should register for ie vat. Some of the cases when business owners are required to register for value added tax Ireland cover the following. 

  1. If your sales in any continuous 12 month period exceed an established threshold. Limits for vat on services Ireland and vat on goods Ireland differ and are €37.000 and €75.000 respectively. 
  2. Regardless of your income, in receipt of services from outside Ireland that are being used on the Irish territory

 Learn more about the thresholds of the Republic of Ireland vat and other cases when you can apply for claiming vat back Ireland on the official website of Irish Revenue. [4]

calculating tax withholding
Source: Unsplash.com

Europe VAT rates comparison – Recent Ireland Vat Rate

Type of VatVAT RateSubjects to Vat
Standard23%Most goods and services
Reduced13.5%Catering and restaurant services,  construction, fuel, electricity, vet fees, arts and theatre tickets, cleaning services
Reduced9%Newspapers, electronically supplied publications, sporting activities’ facilities
Reduced4.8%Livestock rate
Reduced0%All exports, disability aids, some foodstuffs, books, children’s clothes and shoes
Ireland VAT rate comparison [5]

Romania VAT Rate

Romania Business Environment Overview

Truth be told, Romania is an underestimated and thus not a popular destination to start a business in Europe. However, the potential of Romania should be taken into account as this is a country with one of the lowest tax rates in Eastern Europe. Certain businesses can benefit from greatly reduced tax rates that land to as little as 1%. Among other merits of the country are its affordable and high-quality workforce and membership in the European Union. Romania, however, is still facing corruption issues and the comparatively low income of the nationals. [6]

Things to Learn about Romanian Vat

VAT in Romania is known to locals as Taxa pe Valoarea Adaugata [TVA]. Just like in other countries, local authorities set out several conditions that oblige entrepreneurs to register for vat Romania 2021.

  1. Their annual turnover is equal to or exceeds the Romanian leu equivalent of EUR 88,500. 
  2. A taxable person who runs a Romanian business, unregistered under art.153 (Înregistrarea persoanelor impozabile în scopuri de TVA – Registration of taxable persons for VAT purposes) and provides services to customers from other EU state.
  3. A taxable person who runs a business in Romania, unregistered under art. 153, if goods or services from a supplier based and taxable in another EU state, are received in Romania and the receiver is liable for paying taxes on it
  4. A taxable or non-taxable person established in Romania, unregistered under art. 153, who’s about to make a purchase of a value exceeding the threshold set by intra-community acquisitions in the calendar year. [7]

Europe VAT rates comparison – Recent Romania Vat Rate

Type of VatVat RateSubjects to Vat
Standard19%All supplies of goods and services that neither qualify for an exemption or reduced VAT rate.
Reduced9%Supply of medicine for human and veterinary use, supply of foods including non-alcoholic drinks, domestic animals and livestock, products used in order to complete or substitute food, supply of fertilisers and pesticides, etc.
Reduced5%Accommodation, restaurant, and catering services, supply of school manuals, books, magazines, transport services for tourism or leisure purposes, supply of high-quality food products
Romania Vat rate comparison [8]
a man calculating taxes
Source: Unspash.com

Vat in Czech Republic

Czech Republic Business Environment Overview

Located in the heart of Europe, the Czech Republic is one of the most attractive European destinations for foreign investments. In 2020, the World Bank ranked the Czech Republic 41th out of 189 countries in its “Ease of doing business” report.

Apart from the great geographical location, reasons to invest in the Czech Republic are an affordable and skilled workforce as well as a stable political and economic environment. Let’s move further and see how things are going with Value Added Tax.

Things to Learn about Czech Vat

All regulations related to the vat Czech Republic rate have been implemented by the VAT act since 1994. The most important statements of local VAT result from EU directives in the field of Value Added Tax. So how do you know if it’s the right time to apply for Czech vat number? Can’t leave you waiting for an answer any longer. Like other EU countries, the Czech Republic needs VAT registration in situations typical for this process:

  1. You are a Czech-seated company whose turnover exceeds the 1.000.000,- CZK  in 12 consecutive months.
  2. Regardless of the income level, if a company is based outside of the Czech Republic and imports goods with the Czech Republic as the country of entry.
  3. Despite the income level, if a company is settled outside the EU, and you import goods into the Czech Republic and afterwards sell them locally or in the EU (Amazon sellers included).
  4. Regardless of the income level if you import goods to the territory of the Czech Republic.
  5. Live events, including exhibitions, conferences, concerts,

Own-cost delivery of goods. [10]

a calculator on phone screen with taxes
Source: Unsplash.com

Europe VAT rates comparison – Recent Czech Republic Vat Rate

The Czech Republic is one of few countries that temporarily cut Vat as an emergency measure during the Corona crisis. The purpose was to support businesses and customers during the hard pandemic times. Let’s, however, check out the most recent Czech vat rate.

Type of VatVat RateSubjects to Vat
Standard21%Basic goods and services
Reduced15%Supplies of groceries, construction works related to social housing
Reduced10%Some medicaments, books, e-books, newspapers, shoe and clothing repairs, hairdresser services, hotel accommodation, etc
Reduced0%Intra-community and international transport
Czech VAT rate comparison [11] [12]

VAT in Portugal

Portugal Business Environment Overview

Last but not least in our Europe VAT rates comparison, Portugal is one more great European destination to do business in. The country encourages foreign investors mainly with the possibility to obtain a Residence Permit for making large investments and creating new job positions for locals. Of course, it comes hand in hand with all the perks of the leading business in any country member of the European Union, mainly with the access to a large market of potential customers. Besides, the economic strength of the Portuguese economy, confirmed by the World Bank “Ease of doing business” report, grants additional stability. [13]

a couple holding hands in Portugal
Source: Unspash.com

Things to Learn about Vat in Portugal

Portugal Vat is a comprehensive topic. Value added tax rates change in the mainland of Portugal, the Azores and Madeira. The list of businesses eligible for Portuguese vat registration, however, remains the same. Notice that registration for VAT in Portugal is not subject to a certain threshold (except for businesses with a turnover less than 12.500 EUR as of 2021 are the subject to vat exemption Portugal).

A taxpayer that carries out business transactions in Portugal and businesses that import and deliver goods from the other Member States is required for the Portugal value added tax application.

Europe VAT rates comparison – Current Portuguese Vat Rate

The Mainland

Type of VatVat RateSubjects to Vat
Standard23%All goods and services that are not eligible for a reduced rate
Reduced13%Wine, waters for human consumption, decorative plants, usage of alternative forms of energy etc
Reduced6%Certain fresh and frozen meats and meat co-products, milk and dairy products, olive oil, Books, newspapers, news magazines and other periodicals, etc
The Mainland of Portugal VAT rate comparison

The Azores

Type of VatVat RateSubjects to Vat
Standard18%All goods and services that are not eligible for a reduced rate
Reduced9%Wine, waters for human consumption, decorative plants, usage of alternative forms of energy etc
Reduced4%Certain fresh and frozen meats and meat co-products, milk and dairy products, olive oil, Books, newspapers, news magazines and other periodicals, etc
The Azores VAT rate comparison

Madeira

Type of VatVat RateSubjects to Vat
Standard22%All goods and services that are not eligible for a reduced rate
Reduced12%Wine, waters for human consumption, decorative plants, usage of alternative forms of energy etc
Reduced5%Certain fresh and frozen meats and meat co-products, milk and dairy products, olive oil, Books, newspapers, news magazines and other periodicals, etc
Madeira VAT rate comparison  [14], [15], [16]

Europe VAT Rates Comparison – So Where is the Best Rate?

Business opportunities presented by each of the abovementioned countries make the choice of the best destination a real challenge. European countries with strong and stable economies grant a powerful and promising background for business development. However, the Europe Vat rates comparison must have definitely made the decision less confusing. Regarding economic advantages, business-friendly environment, low taxation system, and the accessibility of an educated and skilled workforce, we suggest Ireland as the number one country to incorporate a business in.

Irish consulting agency Chern & Co offers an extensive range of packages for company set up in Ireland. We choose only legal ways of doing business and put out customers’ satisfaction as a major priority. Proceed to our website to learn more about us, and what we offer or contact our managers right away! We promise a free first private consultation!

Europe Tax Guide

List of Sources
  1. https://www.gov.pl/web/poland-businessharbour-en/good-reasons-for-choosing-poland#:~:text=Poland%20has%20earned%20the%20reputation,is%20the%20CEE%20region’s%20leader.
  2. https://www.podatki.gov.pl/en/value-added-tax/registering-for-vat/#:~:text=The%20obligation%20to%20register%20for,000%20in%20a%20fiscal%20year.
  3. https://taxsummaries.pwc.com/poland/corporate/other-taxes
  4. https://www.revenue.ie/en/vat/vat-registration/who-should-register-for-vat/what-are-the-vat-thresholds.aspx 
  5. https://wise.com/gb/vat/ireland 
  6. https://nomadcapitalist.com/finance/offshore/tax-business-in-romania/ 
  7. https://romaniacompany.com/vat-registration-in-romania/#:~:text=VAT%20registration%20is%20mandatory%20for,taxed%20under%20the%20state’s%20legislation 
  8. https://taxsummaries.pwc.com/romania/corporate/other-taxes#:~:text=Value%2Dadded%20tax%20(VAT),for%20a%20reduced%20VAT%20rate.
  9. https://www.evat.cz/vat-limits
  10. https://polishtax.com/vat-in-the-czech-republic/
  11. https://www.avalara.com/vatlive/en/country-guides/europe/czech-republic/czech-vat-rates.html
  12. https://taxsummaries.pwc.com/czech-republic/corporate/other-taxes#:~:text=VAT%20is%20generally%20charged%20at,services%20within%20the%20Czech%20Republic.
  13. https://www.globalization-partners.com/blog/hiring-and-doing-business-in-portugal-benefits-for-u-s-based-companies/#gref
  14. https://eportugal.gov.pt/en/cidadaos-europeus-viajar-viver-e-fazer-negocios-em-portugal/impostos-para-atividades-economicas-em-portugal/imposto-sobre-valor-acrescentado-iva-em-portugal 
  15. https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/c-iva-listas.aspx 
  16. https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/c-iva-listas.aspx#L2

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