Consumption Tax Trends 2022

2. Value-added taxes - Main design features and trends

2.1. Introduction

Although VAT systems are generally built on the basis of a common set of core principles, such as the principles of neutrality and of destination-based taxation (see Chapter 1), there is considerable diversity in the actual design and operation of these VAT systems in OECD countries. This is notably illustrated by the wide variety of reduced rates, exemptions and other preferential treatments and special regimes that are widely used in OECD countries, for practical or historical reasons, to support certain economic sector or to achieve equity or social objectives.

This chapter presents an overview of the VAT rate structures in OECD countries and their evolution between 1975 and 2022, including the scope of reduced rates and the temporary measures taken by government to support consumers and businesses facing the COVID-19 pandemic (Section 2.2) and looks in some detail at the VAT exemptions that exist in these countries (Section 2.3). This is followed by an overview and analysis of the wide variety of special regimes used in OECD countries on the following aspects: specific restrictions to the right to deduct VAT on specific inputs (Section 2.4), registration and collection thresholds (Section 2.5), and the application of margin schemes (Section 2.6). This chapter also presents the challenges of applying VAT to international trade, the solutions developed by the OECD and how member countries are implementing them (Section 2.7). It finally provides VAT Revenue Ratio data, as an indicator of the revenue effect of VAT exemptions, reduced rates and non-compliance (Section 2.8) and the measures taken by governments to enhance the enforcement of VAT and combat VAT fraud and avoidance (Section 2.9).

2.2. The evolution of VAT rates

2.2.1. Standard VAT rates remained stable in recent years

The evolution of VAT rates in the OECD can be divided into four main periods. The first period between 1975 and 2000 has seen a progressive increase in the average standard VAT rates from 15.6% in 1975 to 18.1% in 2000.

During a second period, between 2000 and 2008, the standard rate of VAT remained stable in most countries, with 26 out of 37 countries maintaining a rate between 15% and 22%. As of 1 January 2008, only four countries had a standard rate above 22% (Denmark, Iceland, Norway and Sweden –see Annex Table 2.A.1).

The third period, between 2009 and 2016, was marked by a considerable increase in the standard VAT rate in many countries, often in response to financial consolidation pressures caused by the financial and economic crisis. VAT standard rate increases played a key role in many countries' consolidation strategies, since raising additional revenue from VAT rather than from other taxes (such as income taxes) is often considered more effective, generating immediate additional revenue, and less detrimental to economic growth and competitiveness than income taxes (Jens Matthias Arnold, 2011[1]). Between January 2009 and December 2016, 25 OECD countries raised their standard VAT rate at least once. These changes occurred principally in European Union countries (Czech Republic, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovak Republic, Slovenia and Spain) but also in a number of non-EU countries (Colombia, Iceland, Israel, Japan, Mexico, New Zealand, Switzerland and United Kingdom). Two OECD countries lowered their standard VAT rate temporarily and then raised it again during this period (Ireland and the United Kingdom). This evolution resulted in a hike of the unweighted OECD average standard VAT rate from 17.8% in January 2008 to an all-time record level of 19.3% on 1 January 2017. Ten OECD countries operated a standard VAT rate above 22% on 1 January 2017 against only four in 2008. All these countries belong to the European Union, except Iceland and Norway.

The increases in standard VAT rates did not continue as OECD countries entered a new period of stable standard VAT rates, with only Japan having increased its standard VAT rate since January 2017 (from 8% to 10% in October 2019).

Only four OECD countries have reduced their standard VAT rate since January 2008, i.e. Iceland (which increased its standard VAT rate from 24.5% to 25.5% in 2010 and reduced it to 24% in 2015), Israel (which progressively increased its standard VAT rate from 15.5% in 2008 to 18% in 2013 and reduced it to 17% in 2015), Latvia (which increased its standard VAT rate from 18% to 21% in 2009 and to 22% in January 2012 and reduced it back to 21 in July 2012) and Switzerland (which increased its standard VAT rate from 7.6% to 8% in 2011 and reduced it back to 7.7% in 2018). Germany and Ireland temporarily reduced their standard VAT rate, respectively from 19% to 16% (from June to December 2020) and from 23% to 21% (from September 2020 to March 2021) in the context of the COVID-19 pandemic but have now returned to their original rate.

As a result, the unweighted OECD average standard VAT rate has remained relatively stable at 19.2% in 2022 compared to 19.3% in 2017 (see Figure 2.1).

Figure 2.1. Evolution of standard VAT rates – OECD average 1976-2022

Note: Unweighted average.

Source: Author’s calculations.

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Major differences in standard VAT rates continue to be observed among OECD countries, with rates ranging from 5% in Canada (noting, however, that most Canadian provinces levy specific sales taxes or Harmonised Sales Taxes alongside the Federal 5% GST); 7.7% in Switzerland and 10% in Australia, Japan and Korea; to 25% in Denmark, Norway and Sweden and 27% in Hungary (see Figure 2.2). On 1 January 2022, 23 OECD countries operated a standard VAT rate of 20% or more, with 10 of these countries having a standard VAT rate of 23% or more. All these countries are EU Member States, except for Iceland and Norway (with respectively a 24% and a 25% VAT standard rate).

The average standard VAT rate of the 22 OECD countries that are members of the EU is at 21.8%, which is significantly above the OECD average (19.2%). EU Member States are bound by common rules for establishing their national VAT rates (VAT Directive 2006/112/EC), which notably set the minimum level of the standard VAT rate at 15%.

Figure 2.2. Standard VAT rates in OECD countries, 2022

Note: Data as at 1 January 2022.

Source: Author's work based on country information.

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2.2.2. OECD countries continue to apply a wide variety of reduced rates mainly as a means to promote equity and/or to stimulate certain sectors

Most OECD countries apply reduced VAT rates to a wide range of goods and services (see Annex Table 2.A.2). With the exception of Chile, all OECD countries that operate a VAT apply one or more reduced rates to pursue various policy objectives. A major reason for the application of reduced rates is the promotion of equity. Countries in the OECD generally consider it desirable to alleviate the VAT burden on necessity goods and services such as food and water supply, which typically form a larger share of expenditure of lower income households, by taxing them at a preferential VAT rate. Most countries also apply reduced VAT rates or exemptions to health and medical supplies, education and housing. In addition, reduced VAT rates have also been used to stimulate the consumption of “merit goods” (such as cultural products), or to promote locally supplied labour-intensive activity (e.g. tourism), or to address environmental externalities.

However, empirical evidence suggests that exemptions and reduced VAT rates are not the most effective way of achieving those policy objectives (OECD/KIPF, 2014[2]) and they can even be regressive in some instances. Other measures, such as providing targeted support through the income tax and/or the social transfer and benefit system, tend to be more effective in addressing equity concerns and to pursue policy objectives other than raising tax revenues (Thomas, 2020[3]). Reduced VAT rates that are targeted at supporting lower-income households (i.e. to address distributional goals) typically do have the desired progressive effect. Notably reduced rates for basic food generally provide greater support to the poor than to the rich as a proportion of household income and as a proportion of expenditure. However, despite their progressive effect, research led notably by the OECD has shown that these reduced VAT rates remain an inefficient distributive tool. This is because better-off households tend to benefit more in absolute terms from VAT reduced rates than low-income households. As richer households tend to consume more, and more expensive products than poorer households, their consumption of the tax-favoured goods and services is generally greater than that of poorer households. Research has also demonstrated that preferential VAT rates introduced to stimulate employment (e.g. in the tourism or hospitality sectors), or to support cultural activities (e.g. theatre) or to pursue other non-distributional goals, clearly benefit richer households more than lower-income categories of the population, and often considerably so.

Preferential VAT regimes such as reduced rates and exemptions (see Section 2.3) also tend to considerably add to the complexity of the VAT system, increasing the compliance burden for businesses and negatively impacting compliance levels (C. Evans; R. Highfield; B. Tran-Nam; M. Walpole, 2020[4]). A more effective policy to achieve distributional objectives, in principle, is to reduce the scope for reduced VAT rates where possible and use measures that are directly targeted at increasing the real incomes of poorer households and public services for these households. It is recognised, however, that although this analysis is widely shared, it is often difficult if not impossible to implement it in practice. The political economy obstacles to broadening the VAT base (in particular their perceived distributional impact) can indeed be formidable, and often insurmountable, particularly where the social transfer and benefit system may not be sufficiently effective to ensure that poorer households are properly compensated for the impact of a VAT increase on the cost of their consumption basket.

Member States of the European Union are bound by common rules regarding the operation of reduced VAT rates (VAT Directive 2006/112/EC). This common framework allows Member States to apply one or two reduced rates of not less than 5% and a third reduced rate lower than 5 % (incl. 0%) to a limited number of goods and services listed in the VAT Directive. In addition, the Directive provides that the European Commission can grant Member States the authorisation to apply a zero rate (“exemption with deductibility of the VAT paid at the preceding stage “) to the import and supplies of goods for the benefit of disaster victims. The European Commission also allowed Member States to apply a temporary zero rate to the import and supply of certain products needed to combat the COVID-19 (see Section 2.2.3 hereafter).

Since 2020, a number of countries made changes to the level and/or scope of their reduced VAT rates. Some are permanent (see below) while others are temporary in the context of the COVID-19 pandemic (see Section 2.2.3 hereafter).

Permanent changes include the application of a (further) reduced VAT rate to female sanitary products in Austria, Ireland, Italy, Mexico, Slovenia and the United Kingdom. This has followed similar measures taken by several other OECD countries in recent years, i.e. Australia, Belgium, Canada, Colombia, Germany and Iceland. Austria, Czech Republic, Estonia, Greece, Lithuania, Netherlands, Spain and the United Kingdom have reduced the VAT rate applicable to electronic publications, following the adoption in 2018 of an amendment to the EU VAT Directive allowing the application of VAT reduced rates to electronic publications, which had already triggered rate reductions in Belgium, Finland, France, Germany, Ireland, Luxembourg, Norway, Poland, Portugal and Sweden. In Latvia, the VAT rate on books, newspapers and periodicals (including in electronic format) was further reduced from 12% to 5%. Reduced rates now apply to e-books and e-publications in 20 of the 37 OECD countries that have a VAT – these are all EU Member States, except Iceland, Norway and the United Kingdom. Portugal permanently reduced its VAT rate on certain supplies of electricity up to a certain consumption amount to 13%. Austria (in 2021) and Sweden (in 2022) added repair services to the items that are taxed at the reduced rate of respectively 10% and 6%.

In the European Union, as of 1 July 2022, a zero rate will apply to supplies made for the benefit of the armed forces of the EU Member States when they are assigned "to a defence effort carried out with a view to implementing an activity of the Union within the framework of the common security and defence policy” similar to what is already applicable for NATO armed forces.

2.2.3. Temporary VAT rate reductions have been used in response to the COVID-19 crisis and to rising energy costs.

Most OECD countries have introduced temporary VAT rate reductions in response to the COVID-19 crisis

In 2020 and 2021, many OECD countries included temporary VAT rate reductions, including zero rates, in their tax response packages to the COVID-19 crisis (see (OECD, 2020[5]) and the country notes to Annex Table 2.A.2). Most of these measures have been aimed at supporting the healthcare sector, in particular through the application of zero rates or reduced rates to supplies and imports of certain medical equipment and sanitary products and to healthcare services (Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovak Republic, Spain and United Kingdom) where these were not yet VAT exempt or subject to reduced rates under normal rules.

Several countries also introduced temporary rate reductions to stimulate consumption and/or to support specific economic sectors that have been hardest hit by the COVID-19 crisis. These include restaurants (Austria, Belgium, Colombia, Germany, Greece, Lithuania); accommodation or other tourism activities (Austria, Colombia, Costa Rica, Czech Republic and United Kingdom); cinema, culture or sports (Austria, Greece, Lithuania, Netherlands and United Kingdom); passenger transport (Colombia, Greece and Türkiye); or leases of commercial property (Colombia). Colombia applies a VAT rate of 0% to supplies of certain goods to final consumers on specific days in the year (“VAT holidays”). In most instances, the duration of these measures was initially limited in time, typically to three to six months, but many of these were subsequently extended in response to the (often) longer-than-expected duration of the pandemic.

While many of these measures have been phased out, a number of these temporary VAT rate reductions were extended and remained in place after 1 January 2022, such as the application of reduced or zero rates to imports and supplies of certain goods to combat COVID-19 pandemic (Austria, Belgium, Canada, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Portugal, Slovak Republic, Slovenia, Spain and Sweden); passenger transport (Colombia, Greece); tourism-related services (Colombia, Costa Rica, Ireland, and United Kingdom); cinema (Greece); and restaurants (Greece).

A few OECD countries introduced more general temporary VAT rate reductions in response to the outbreak of the pandemic. Germany reduced its standard VAT rate from 19% to 16% and its reduced VAT rate from 7% to 5% from 1 July to 31 December 2020. Ireland reduced its standard VAT rate from 23% to 21%, from 1 September 2020 until 28 February 2021. Norway decreased its 12% reduced VAT rate to 6% from 1 April until 1 October 2021.

Some countries have recently introduced or announced temporary reduced VAT rates to cushion the impact of the sharp rise in energy prices

Energy prices have been soaring since early 2021 due to a combination of supply and demand factors. These include long-term trends such as underinvestment in natural gas and clean energy supply, and short-term developments like reductions in natural gas spot delivery by Russia and a strong recovery in demand in the aftermath of the COVID-19 crisis (IEA, 2021[6]). It is very difficult for consumers and businesses to drastically reduce their energy consumption in the short term, which raises concerns over energy affordability and the cost of living. Price shocks have had significant adverse effects on households and businesses, which has prompted governments to respond with short-term measures to support income and limit price increases (Boone and Elgouacem, 2021[7]). A wide range of measures have been taken by governments to cushion the impact of raising energy prices, including subsidies, transfers, price support measures and reductions in personal income taxes, corporate income taxes and consumption taxes. (OECD, 2022[8])

Price support measures in particular can take the form of price controls, rebates at the pump, reductions in excise duties (see Chapter 3), environmentally related taxes and VAT rates (see below).

In this context, several OECD countries reported the introduction of VAT rate reductions, most often announced as temporary measures (see country notes to Annex Table 2.A.2). For instance, in 2021, Spain reduced its VAT rate on energy bills from 21% to 10% and Italy cut its VAT rate on the use of natural gas supplies for “civil and industrial uses” and for transport uses from 21% to 5%. Several other European countries followed suit in 2022, including Belgium where the VAT rate was reduced from 21% to 6% on the supply of electricity for residential consumption, gas and district heating; Ireland with a reduction of the VAT rate on energy products from 13.5% to 9%; Netherlands with a reduction of the VAT rate from 21% to 9% on natural gas, electricity and district heating and Poland that reduced its VAT rate on the provision of electricity from 23% to 5% and on district heating from 23% to 5%. In September 2022, the government of Luxembourg announced a temporary reduction of its standard VAT rate from 17% to 16% and of its reduced rates from 14% to 13% and from 8% to 7%.

Although price support measures have been the most common form of measures implemented by countries because they are the most visible, quickest and easiest to implement, they have a number of disadvantages in the medium to long term. They have indeed a strong negative impact on revenue, tend to be untargeted and benefits can accrue disproportionately to large energy consumers who often have higher incomes, limit the incentive for energy savings or switching away from fossil fuels and discourage new infrastructure investments.

2.3. Exemptions

2.3.1. OECD countries make extensive use of VAT exemptions

VAT regimes in the OECD make extensive use of exemptions, in addition to reduced rates (see Annex Table 2.A.3). In this context, exemption means that the supplier does not charge the VAT on its outputs and, as a consequence, has no right to recover the VAT on its related inputs. In some jurisdictions, exemption is referred to as “input taxation” to indicate that the supply is not free of VAT but that there is a “hidden VAT” in the price of the exempt supply - i.e. the VAT burden incurred on the inputs is embedded in the price of the exempt outputs. Exemption is thus not the same thing as absence of taxation.

Although it is a significant departure from the basic concept of VAT, all OECD countries that operate a VAT apply a number of exemptions. A wide variety of motivations exist for the application of VAT exemptions. These include the difficulty to determine the tax base (e.g. financial and insurance services) or the desire to exclude activities from the VAT base that are considered as public services or as serving a purpose of general and/or social interest (education, health, postal services, charities). A number of exemptions have their roots in tradition, such as the letting of immovable property and the supply of land and buildings. Certain sectors that are exempt from VAT may also be subject to other specific taxes (e.g. property, insurance, financial services).

Exemptions beyond these core items are also numerous and cover a wide diversity of sectors such as culture, legal aid, passenger transport, public cemeteries, waste and recyclable material, water supply, precious metals and agriculture (see Annex Table 2.A.3). To this regard, EU Member States are subject to common rules providing for the exemption of supplies considered as in the public interest such as postal services, healthcare, social services, education, public broadcasting and charities but also for a number of specific supplies such as financial and insurance services, transactions involving immovable property and gambling. However, EU Member States may choose to allow business to opt to tax certain transactions and to set specific conditions for some exemptions.

A number of services that are generally exempt in OECD countries are taxed in some of these countries. For example, postal services are taxed in Australia, Canada, Japan, New Zealand and Norway; betting or gambling is taxed in Australia, Canada, Korea, New Zealand, Türkiye and the United Kingdom; and insurance services are taxed in Mexico, New Zealand, Türkiye and in some cases in Australia. On the other hand, the transportation of passengers, which is taxed in most countries, is exempt (to some extent) in Chile, Denmark, Ireland and Korea. In Chile, services that are not specifically listed as subject to VAT by law, are treated as “out of scope”, i.e. they are exempt from VAT. These include legal, accounting, engineering, architecture and other professional services.

2.3.2. Exemptions have a number of undesirable effects

The standard advice in VAT design is to have a short list of exemptions, limited to basic health, education and perhaps financial services. By not allowing the deduction of input tax, VAT exemptions create an important exception to the neutrality of VAT (see Chapter 1). The following paragraphs provide an overview of the main, often adverse consequences of exemptions.

VAT exemptions introduce a cascading effect when applied in a B2B context. A business making an exempt supply can be expected to pass on the uncreditable input tax it has incurred by including it in the price of this supply. This “hidden tax” will subsequently not be deductible/recoverable for the recipient business in the VAT system. If the outputs of this recipient business are not also exempt, this hidden VAT will presumably be part of the price for the supplies on which it will charge output VAT. The result is a hidden tax at a variable rate depending on the number of production stages that are subject to the tax. This distorts businesses’ production decisions and choices of organisational form. The size of this cascading effect depends on where the exemption is applied in the supply chain. If the exemption is applied only at the stage of the final consumption, there is no cascading effect and the consequence is simply a loss of tax revenue since the value added at the final stage escapes tax. If the exemption occurs at some intermediate stage, the consequence of the cascading effect may be an increase of net revenues in a non-transparent manner.

Exemptions create incentives for reducing tax liability by vertical integration (“self-supply”) and disincentives for outsourcing as firms have an incentive to produce their inputs internally rather than to purchase externally and incur irrecoverable VAT. This may lead to economic inefficiencies and can initiate a dynamic whereby exemptions feed on each other resulting in “exemption creep”: once a sector receives an exemption, it has an incentive to lobby for exemptions for those from whom it buys its inputs in order to avoid paying hidden VAT on its inputs.

Exemptions generally lead to the under-taxation of supplies to consumers, as the tax burden in theory equals the tax on inputs used by exempt businesses in the supply chain but not on its value-added, and an over-taxation of businesses who are unable to deduct the “hidden” tax embedded in their inputs.

In the international context, exemptions compromise the destination principle for taxation of internationally traded goods and services (see Chapter 1) and may create competitive distortions. When an exporter uses exempt inputs, he will generally not be able to remove the irrecoverable VAT resulting from the exemption applied at an earlier stage in the production chain. The export thus becomes effectively “input taxed”. On the other hand, businesses that use inputs that are VAT exempt under national law, have an incentive to import these inputs from countries where these are zero rated for export instead of purchasing them from exempt domestic providers.

It has been suggested that managing exemptions also increases administrative costs and compliance burden. As is the case for differentiated rate structures, it may often be difficult for businesses and tax administrations to distinguish between exempt and taxable supplies, in particular in complex areas such as financial services. Businesses that make both taxable and exempt supplies are often faced with complex allocation rules to determine the share which is attributable to taxed outputs and for which it is thus entitled to an input tax credit. However, there is little quantitative evidence of the impact of exemptions on the cost of administration and on compliance burden (Bird and Gendron, 2007[9]).

The VAT exemption of financial services, in particular, is subject to frequent debate across jurisdictions, such as most recently in the EU. In a recent paper (GFV N°087 of March 2019), the European Commission recalled that the European Union’s VAT exemption rules for financial and insurance services have not kept pace with developments in these sectors, which makes these rules increasingly complex and difficult to apply in practice. This has led to rising litigation rates, legal uncertainty, and high administrative and regulatory costs. These rules are also interpreted and applied inconsistently across Member States, leading to competitive distortion within the EU. The European Commission therefore launched a public consultation in February 2021, the outcome of which was published in September 2021 (European Commission, 2021[10]). The findings of this consultation show that, although a vast majority of respondents consider that the VAT exemption is still needed, there is a need for clarification and further harmonisation across the EU.

The emergence of “fintech” and of new products and services such as virtual currencies and other crypto-assets raises new questions for VAT regimes, notably in light of their existing rules for the VAT treatment of financial services (OECD/G20, 2020[11]).

2.4. Restrictions to the right to deduct VAT on specific inputs

Although the burden of the tax should not fall on businesses, the right to deduct the VAT on business inputs is in principle limited to inputs that are used for producing taxable outputs. The right to input VAT deduction is in principle denied in cases where inputs are used to make onward supplies that are not taxable, i.e. exempt without credit (e.g. health care or financial services for example – see Section 2.3 above) or outside the scope of VAT (e.g. supplies for no consideration). Input-VAT deduction is normally also denied when purchases are not (wholly) used for the furtherance of taxable business activity, for example, when they are used for the private needs of the business owner or its employees (i.e. for final consumption).

In addition to the rules described above, most OECD countries have legislation in place that provides for restrictions to input VAT deduction on a number of goods and services that is linked to their nature rather than to their use by businesses (see Annex Table 2.A.4).

The rationale behind these limitations is generally threefold. First, they aim to avoid the administrative burden of having to police the actual use of goods and services that may easily be used for dual business/private purposes due to their very nature. Second, it is a way of reducing risks of fraud. Third, such commodities often contain an element of “consumption” (e.g. restaurant meals).

All OECD countries operating a VAT, except Colombia, Israel, Japan, Mexico and Switzerland, report restrictions to the right to VAT deduction on a number of specific inputs - mainly entertainment and vehicles. Colombia denies the deduction of VAT levied on the acquisition of fixed assets that are not considered as “productive fixed assets”. In Mexico, although there are no specific restrictions, the law provides that input VAT deduction is allowed only on inputs that are “strictly indispensable” for the principal business activity. The expenses on which this input VAT is incurred must be deductible under the Income Tax Law, which provides a list of “authorised deductions” for each type of regime.

Restrictions to the deduction of input VAT on entertainment costs are the most widespread, although the items included in that category may vary widely. These restrictions may include VAT incurred on restaurant meals; on (alcoholic) beverages; reception costs; hotel accommodation; attendance at sporting or cultural events; and on gifts and transport services. Seven OECD countries (Chile, Colombia, France, Israel, Japan, Switzerland and Türkiye) have not reported such specific limitation to the right to input VAT deduction.

The deduction of input VAT on the purchase and/or the use of vehicles is subject to limitations in 24 out of the 37 OECD countries operating a VAT. Colombia, Czech Republic, Germany, Israel, Japan Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Slovak Republic, Spain and Switzerland do not report any such specific restrictions.

The restriction to input-VAT deduction can be limited to a share of the VAT incurred. This can for instance be the case for the VAT incurred on the use of cars by the employees of a business, which can be limited to a fixed percentage. Some countries restrict the deduction of input VAT on cars to 50%, even if the car is fully used for business purposes.

2.5. Registration and collection thresholds

VAT is often considered as particularly burdensome for small and medium size businesses (SMEs) to comply with (European Commission, 2013[12]) (Evans et al., 2018[13]). Many countries have therefore introduced simplification regimes for SMEs to ease the VAT compliance burden. These regimes can be grouped into three main categories: those that provide for an exemption from the VAT regime (exemption thresholds); those that facilitate the calculation of VAT liability; and those that simplify accounting, filing and/or payment obligations (OECD, 2015[14]).

In most OECD countries (except Chile, Colombia, Costa Rica, Mexico and Spain) businesses whose annual turnover is below a certain threshold are not required to charge and collect the tax on their outputs and their input VAT is not deductible. In Colombia and Türkiye, this only applies to individuals and not to companies or incorporated businesses (see Annex Table 2.A.5).

The consequences of such exemptions are equivalent to treating small businesses as non-taxable businesses. There are two kinds of exemption thresholds: registration thresholds that relieve suppliers from both the requirement to register for VAT and to collect the tax; and collection thresholds under which taxpayers, are required to register for VAT but are relieved from collecting the tax until they exceed the threshold. Different types of activities (e.g. supply of services vs. supply of goods) or sectors (e.g. the non-profit sector) may be subject to different thresholds or even be excluded from their application (e.g. the construction sector). In most cases registration thresholds do not apply to foreign businesses and in some cases collection thresholds apply only to individuals or to businesses that are not subject to commercial accounting requirements.

The calculation of thresholds is generally based on annual turnover. In Japan, businesses (companies and individuals) are not required to register and account for VAT during the first two years of establishment if they remain below a capital-based threshold, whereas a threshold based on an annual taxable turnover applies after the first two years (with some exceptions, based on levels of turnover). Although thresholds are generally based on annual turnover, their application may be subject to additional rules and conditions.

The level of VAT thresholds is generally the result of a trade-off between, on the one hand, minimising compliance and administration costs for small businesses and tax administrations, and on the other hand, the need to protect revenue and avoid competitive distortions. The levels of these thresholds vary significantly across OECD countries (see Figure 2.3). Four groups can be broadly distinguished.

Ten countries have a relatively high general threshold above USD 80 000 of turnover per year: France, Ireland, Italy, Japan, Lithuania, Poland, Slovak Republic, Slovenia, Switzerland and the United Kingdom.

Nine countries have a threshold between USD 40 000 and 80 000: Australia, Austria, Czech Republic, Estonia, Hungary, Korea, Latvia, Luxembourg and New Zealand.

Twelve countries have a relatively low threshold, below USD 40 000: Belgium, Canada, Denmark, Finland, Germany, Greece, Iceland, Israel, Netherlands Norway, Portugal and Sweden. Among these countries, three have a particularly low threshold below USD 10 000 (Denmark, Norway and Sweden).

Six OECD countries do not operate any general VAT exemption threshold: Chile, Colombia, Costa Rica, Mexico, Spain and Türkiye.

Since 2020, only Finland, Israel, Korea and Luxembourg have raised their threshold while none have reduced it. Compared to 2012, 17 OECD countries have raised their threshold (Austria, Belgium, Estonia, Finland, France, Germany, Hungary, Iceland, Israel, Italy, Korea, Luxembourg, Netherlands, Poland, Portugal, Slovenia and the United Kingdom). Only one country has decreased its threshold during this period (Latvia from EUR 50 000 to EUR 40 000).

There are no definitive arguments on the need for, or the level of, VAT thresholds. The main reasons for excluding small businesses (a notion that may vary considerably across countries) are that the costs of administration are disproportionate to the VAT revenues raised and, similarly, that the VAT compliance costs can be disproportionate for many small businesses compared to their turnover.

Determining the level of a VAT threshold is challenging. A relatively high threshold may give an advantage to small businesses, distorting competition with larger companies. A relatively low threshold may act as a disincentive for businesses to grow or as an incentive to avoid VAT by splitting activities artificially. It can also frustrate policy efforts to formalise the economy. The latter may be at least partly addressed by applying a simplified regime to businesses below the VAT threshold and thus bringing them into the “formal” economy. The level of the threshold is often the result of a trade-off between minimising compliance and administration costs, and the need to protect revenue and avoid competitive distortion.

Figure 2.3. Annual turnover registration and collection thresholds, 2022

Note: Annual turnover thresholds expressed in USD purchasing power parity.

Source: Author's work.

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All OECD countries that have a registration or collection threshold give the option to businesses below the threshold to register and account voluntarily for VAT, except Israel and Korea. Voluntary registration is often intended to provide an option for small businesses to avoid the disadvantages of non-registration. This however increases the risk of VAT fraud by “fly-by-night” traders who register and claim VAT refunds before disappearing again. A majority of OECD countries therefore impose a minimum period of time during which taxpayers that have registered voluntarily must remain registered. This period varies from one year (Australia, Canada, Czech Republic, Greece, Hungary, Slovak Republic and Switzerland) to two years (Denmark, France, Japan and Norway) or in some cases, three years (Netherlands and Sweden) or five years (Austria, Germany, Portugal and Slovenia). Fourteen countries do not apply any minimum registration period (Belgium, Estonia, Finland, Iceland, Ireland, Israel, Italy, Korea, Latvia, Lithuania, Luxembourg, New Zealand, Poland and the United Kingdom).

One challenge of VAT thresholds is to minimise incentives for small businesses to underreport turnover so as to remain below the exemption threshold, and/or to incentivise small businesses to grow their business. Research (Li Liu, 2019[15]) shows that firms tend to bunch below the registration threshold by restricting their reported turnover to avoid having to register for the VAT when they have a high share of sales to private consumers (B2C); but tend to register voluntarily, even when their turnover is below the threshold, in cases where they have a low share of such B2C sales, a relatively high share of external costs and more competition in the industry.

The adoption of a flexible threshold is one option to reduce a bunching effect. Under such a regime, small businesses that exceed the regular VAT threshold are not obliged to register immediately but are allowed to continue to benefit temporarily from the exemption as long as they do not exceed the threshold by a significant percentage. For example, in France, businesses that exceed the regular thresholds of EUR 85 800 (for goods) and EUR 34 400 (for most services) may continue to benefit from the exemption if their turnover does not exceed EUR 94 300 and EUR 36 500 respectively for more than a year.

A range of other measures have been adopted to reduce compliance costs for SMEs while avoiding the disadvantages of an exemption. Many OECD countries apply simplified presumptive schemes to facilitate the calculation of the VAT liability. These may, for instance, allow small businesses to apply a single flat rate to their turnover for determining the amount of VAT to be remitted to tax authorities instead of requiring a detailed VAT calculation of input and output VAT. Other simplification regimes allow a simplified input VAT credit calculation. A more detailed overview of these regime is available in an OECD report on SME taxation (OECD, 2015[14]).

The application of these exemption thresholds remains typically limited to domestic businesses. These thresholds notably do not apply under most of the “vendor collection regimes” implemented by OECD countries for the collection of VAT on remote supplies of services and intangibles by non-resident suppliers (see Section 2.8 below). Only six of these countries apply a turnover threshold below which non-resident suppliers are relieved from obligations under this regime, i.e. Australia, Canada, Iceland, Japan, New Zealand, Norway and Switzerland. These countries apply the same registration threshold for these non-resident suppliers as for domestic suppliers. The Member States of the European Union are bound by a common legal framework legislation (the EU VAT Directive) that does not allow such a registration threshold for non-EU suppliers.

2.6. Usage of margin schemes

Most countries allow or utilise specific methods for determining the VAT liability to simplify VAT administration and compliance in specific situations. Margin schemes are a typical method to simplify VAT calculation, which are often used when the determination of deductible input tax is considered too difficult or impossible under the normal rules, such as for the resale of second-hand goods bought from private individuals and for the activities of travel agencies. Under a margin scheme, the VAT due is determined by reference to the difference between the price paid by the taxpayer and the price of resale rather than on the basis of the full selling price. The reseller is not allowed to deduct the input VAT embedded in its purchase price of the items that are resold under the margin scheme.

Annex Table 2.A.6 shows that all the OECD countries have implemented more or less extensive margin schemes, except Canada, Iceland, Japan Korea and New Zealand. The most common areas where margin schemes are used are trade in second hand goods (in all the EU member States, Australia, Costa Rica, Norway and the United Kingdom; in Israel for used furniture and cars and in Colombia, Mexico and Türkiye for used cars); travel agencies (all the EU Member States and Türkiye); and sales of works of art, collector's items and antiques (in all the EU Member States, Norway, Switzerland and Türkiye). Margin schemes can also apply in real estate and sales of building land (Australia, Chile, France, Türkiye); sales by auction (Greece and Ireland); and fuel retail sales (Colombia, and Portugal). Specific margin schemes also apply to gambling in Australia and sales of coins, stamps and foreign currency in Israel.

In the Member States of the European Union, margin schemes for travel agencies, second-hand goods, works of art, collector's items and antiques are based on the EU VAT Directive.

2.7. The COVID-19 pandemic has impacted VAT administration

Beyond temporary VAT rate reductions described in Section 2.2.3 above many OECD countries have introduced policy and administrative measures to alleviate the VAT burden on businesses, as part of their packages to support businesses during the COVID-19 crisis (OECD, 2020[5]). These measures mainly included the deferral of the obligation to file returns and pay the VAT due, to support business cash-flow and alleviate compliance burden. Most countries complemented VAT payment deferrals with a suspension, or reduction, of penalties and/or interest charges that are normally applied for late tax filing and payments. Other measures were taken such as the acceleration and/or enhancement of the processing of excess input VAT refund claims, the temporary relaxation of the conditions for claiming relief from VAT on bad debts and increased use of digital communication channels to simplify compliance processes and facilitate the interaction with taxpayers (CIAT/IOTA/OECD, 2021[16]). Several countries temporarily suspended audits and other enforcement and/or recovery actions to limit the additional stress and diversion of resources and time that these actions may cause during the COVID-19 crisis.1 Cases involving potential fraud or businesses with a high-risk profile have typically been excluded from these measures.

Countries’ experience and feedback from the business community through Business@OECD suggest that the VAT measures to support cash flow and to reduce VAT compliance burden have been particularly important in helping to mitigate the impact of the crisis for businesses. VAT payment deferrals, fast and flexible refunds of excess VAT and enhanced relief of VAT on bad debts have been highlighted as particularly important measures to support business cash flow. Measures to temporarily simplify VAT procedures and formalities notably by moving away from paper-based to electronic and online processes have been highlighted as critical in alleviating compliance burdens and in allowing business to continue given the mitigation and containment restrictions in place in many countries. On the other hand, tax authorities have highlighted that measures such as deferral of VAT payments and suspension of audits required careful management to minimise risks of fraud.

The COVID-19 pandemic challenged the operating models of tax administrations, and it triggered an acceleration of their digital transformation, including in the way they interact with taxpayers, with for example a drop of 55% in in-person visits, and a 30% increase in digital contacts (OECD, 2022[17]) and in the way they collect and manage data from the taxpayers and other sources (see Section 2.9. below).

2.8. The application of VAT to digital trade

The international tax challenges of the digital economy dominate the contemporary global dialogue over tax policy and its implementation. The growth of the digital economy, which increasingly informs the broader economy, raises fundamental challenges, including for VAT design and administration. At the core of many of these challenges is the ability of businesses to conduct economic activity within a jurisdiction without conducting a physical activity or having a physical presence in that jurisdiction (see Chapter 1). This applies to digitally supplied services and intangibles as well as to the continuously growing volume of low-value goods purchased online by private consumers from non-resident suppliers.

Countries worldwide recognised that the absence of a robust response to these challenges could lead to increasingly significant VAT revenue losses and growing unfair competitive pressure on brick-and-mortar retailers that were increasingly incapable of competing against the continuously rising volumes of online sales, where VAT was not being levied. This issue became even more important as the COVID-19 pandemic accelerated a further shift from brick-and-mortar businesses to online sales.

The global policy dialogue organised by the OECD in response to these challenges resulted in a set of internationally agreed standards, rules and mechanisms to address the VAT challenges of digital trade. They allow governments to secure important VAT revenues on e-commerce and to ensure a level playing field between e-commerce and traditional businesses, without stifling innovation and economic growth. These solutions were developed in an inclusive manner, notably through the Global Forum on VAT, and reflect consensus among more than 100 jurisdictions worldwide. They were delivered as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) package in 2015 and have been further complimented with guidance to support their effective and consistent implementation since then. The following subsections briefly discuss the main challenges of digital trade and provide a concise overview of the internationally agreed standards and guidance for addressing them. These include principles for identifying the jurisdiction that has the right to levy VAT on cross-border supplies of services and intangibles in accordance with the “destination” principle and mechanisms for the effective collection of the VAT due on these supplies, in particular from non-resident (online) suppliers of goods, services and intangibles.

Box 2.1. The OECD VAT policy framework

The OECD policy framework for addressing the VAT challenges of digital trade has four main pillars:

1. Creating the legal basis for jurisdictions to assert the right to impose VAT on international digital trade. This includes internationally agreed standards for determining the “place of taxation” of online sales of services and digital products by reference to the location of the customer.

2. Ensuring the efficient collection of VAT on online sales of goods, services, and digital products from foreign vendors through simplified VAT registration and collection.

3. Boosting the efficiency of VAT collection by requiring digital platform operators, which dominate global digital trade, to collect and remit the VAT on sales carried out through their platform(s).

4. Enhancing VAT compliance by foreign online vendors through a modern risk-based compliance strategy and robust administrative co-operation

2.8.1. The OECD standards present internationally agreed principles for the consistent application of the destination principle to cross-border trade in services and intangibles

Introduction

The VAT legislation in many countries tends to define a “service” negatively as “anything that is not otherwise defined”, or to define a “supply of services” as anything other than a “supply of goods”. While this generally also includes a reference to intangibles, some jurisdictions regard intangibles as a separate category. For the purposes of this section, references to “services” include “intangibles” unless otherwise stated.

While the determination of the jurisdiction having the taxing rights over supplies of goods is relatively straightforward since they are in principle subject to VAT in the jurisdiction where they are physically located at the time of the supply or where they are imported, it is much less so for services. Given their intangible nature, it is more challenging for VAT systems to determine their place of consumption and thus to determine the jurisdiction that has the right to collect the VAT on the supply of services in a cross-border trade context. A variety of models for determining the place of taxation of internationally traded services can be observed in VAT systems around the world. Many systems for determining the place of taxation of services operate on the basis of a categorisation approach, in which supplies are divided into categories of services with a place of taxation specified for each category. Other models favour an iterative approach, in which the principle underlying the place of taxation rule is described in more general terms and where a series of rules are applied consecutively to determine the appropriate place of taxation. A combination of both approaches may also be applied. The key common feature among these various VAT models for determining the place of taxation of internationally traded services is that they generally aim to implement the destination principle, under which the place of taxation rules are intended to impose tax at the place of consumption.

The translation of these principles in legislation traditionally relied on concrete criteria such as, explicitly or implicitly, the place where the services were performed or the place where the supplier was located to determine the place of taxation. Before the advent of the global digital economy, these criteria were often appropriate for ensuring taxation at the place of consumption as B2C services were indeed generally consumed where they were performed. Now that suppliers can deliver most services remotely form one location to consumers anywhere in the world, these criteria are ineffective for determining the place of their consumption and hence for the effective allocation of jurisdictions’ rights to levy VAT on such services.

The use of these historical place of taxation rules for such remotely deliverable services led to increasingly significant uncertainties, competitive distortions, double taxation, unintended non-taxation and revenue losses.

The OECD International VAT/GST Guidelines present internationally agreed principles for determining the place of taxation of cross-border supplies of services and intangibles

Tax authorities worldwide recognised the need for an internationally agreed framework for the application of VAT to cross-border trade to minimise the growing risks of under-taxation and loss of revenue for governments, and of trade distortion due to double taxation. The need for the implementation of such a consistent global framework became particularly obvious in the context of the strong growth of international trade in online services and digital products as a consequence of the expansion of the digital economy (see Chapter 1). In response to the strong international call for a global standard on VAT design and operation, the OECD’s Committee on Fiscal Affairs (CFA) developed the International VAT/GST Guidelines (hereafter “the OECD Guidelines”), which were adopted as a Recommendation by the Council of the OECD in September 2016.

This Recommendation is the first OECD legal instrument in the area of VAT (OECD, 2016[18]). It incorporates the International VAT/GST Guidelines (OECD, 2017[19]), which present a set of internationally agreed standards and recommended approaches for the consistent application of VAT to international trade, with a particular focus on trade in services and intangibles.

The OECD Guidelines include chapters on the principle of VAT neutrality and its implementation in practice, and on the implementation of the destination principle for allocating the taxing rights on cross-border supplies of services and intangibles. For B2B supplies, the Guidelines establish that the right to levy VAT on cross border supplies of services and intangibles is to be allocated to the jurisdiction where the business customer has located its permanent business presence. For B2C supplies, the Guidelines recommend that the taxing rights over “on-the-spot supplies” be allocated to the jurisdiction in which the supply is physically performed; and that the taxing rights over all other supplies and services in principle be allocated to the jurisdiction in which the customer has its usual residence. These include remote supplies of services and digital products over the Internet (e.g. apps, streaming of music and movies, online gaming) by foreign suppliers. The Guidelines do recognise that a rule for determining the place of taxation by reference to the customer’s location or by reference to the place of physical performance may not identify an appropriate place of taxation in all circumstances and that more targeted rules might be more likely to identify an appropriate place of taxation in these circumstances. The Guidelines therefore provide a framework for evaluating the desirability of a specific place-of-taxation rule in those circumstances. In particular, the Guidelines recommend that the place of taxation for services and intangibles connected with immovable property be determined by reference to the jurisdiction where the property is located.

The OECD Guidelines do not aim at providing detailed prescriptions for national legislation. Jurisdictions are sovereign with respect to the design and application of their laws. Rather, the Guidelines seek to provide guidance to jurisdictions in developing national legislation with a view to facilitating a coherent application of national VAT systems to international trade, taking into account their specific economic, legal, institutional, cultural and social circumstances and practices.

These Guidelines are further complemented with guidance and technical standards to support their coherent implementation and application. These include a report on “Mechanisms for the Effective Collection of VAT/GST where the Supplier is not Located in the Jurisdiction of Taxation” (OECD, 2017[20]), a report on “The role of digital platforms in the collection of VAT/GST on online sales” (OECD, 2019[21]) and a set of toolkits aimed at supporting their actual implementation in different regions of the world i.e. Digital VAT Toolkits for Asia-Pacific (OECD/WBG/ADB, 2022[22])and for Latin America and the Caribbean (OECD/WBG/CIAT/IDB, 2021[23]) providing comprehensive and detailed guidance for the policy design, implementation, operation and enforcement of a comprehensive VAT strategy targeted at digital trade. A Digital VAT Toolkit for Africa will be released in early 2023.

Digital platforms can play a key role in enhancing the efficiency and the effectiveness of VAT collection on online supplies to final consumers

The growth of the digital economy has fundamentally changed the nature of sales and distribution in B2C trade. Consumers increasingly buy online from a website operated by a digital platform that facilitates the online sales of large numbers of individual suppliers. Digital platforms allow businesses of all sizes to efficiently access millions of consumers in what is now a global online marketplace. Digital platforms now facilitate a significant share of digital trade transactions globally. The increasingly dominant role of digital platforms in digital trade offers significant opportunities to enhance the efficiency and the effectiveness of VAT collection on the online supplies made by the large numbers of individual suppliers that these digital platforms facilitate. Digital platforms generally are better positioned than other third-party service providers to assist with the VAT collection process on the supplies that they facilitate because of their close connection with the supplier and the supply as well as their access to the VAT-relevant information. Moreover, imposing VAT compliance obligations on the platform in principle relieves the underlying non-resident suppliers from incurring the economic and administrative burdens of having to comply with the associated VAT obligations in the taxing jurisdiction. Finally, digital platforms are generally able to exercise a degree of economic control over non-resident suppliers, which can be used to assert their compliance with VAT obligations, whereas tax authorities may have limited authority or capacity to enforce VAT obligations on the large number of non-resident businesses selling online to customers within their jurisdiction via the digital platforms. Digital platforms can play various roles to assist jurisdictions with the efficient and effective collection of VAT on online supplies. These roles include information reporting or sharing obligations, education of the underlying suppliers, authorising platforms to operate as a voluntary intermediary for VAT collection on behalf of underlying suppliers and a requirement for the platforms to account for the VAT on the supplies they facilitate under a “full VAT liability regime” where they are designated by law as the supplier for VAT liability and compliance purposes. Under that regime, the digital platform is solely and fully liable for assessing, collecting, and remitting the VAT due on the online sales in the jurisdiction of taxation. Almost all OECD countries (see below) consider that such a full VAT liability regime for digital platforms is the most effective and comprehensive means of ensuring compliance with VAT obligations on the online sales that non-resident suppliers make through these platforms.

The OECD Guidelines and standards have had a considerable impact on VAT policy reforms in OECD countries and beyond

These OECD Guidelines and associated guidance have already had a considerable impact on VAT policy reforms in OECD countries and beyond, aimed at effectively collecting the VAT over cross-border trade in services and intangibles. At least 76 jurisdictions in the world have already enacted reforms to achieve more effective taxation of international digital trade and a further 34 are identified as being either in the process of enactment or actively considering commencement of reforms. Very positive results have been reported both in terms of compliance and revenue collected from these measures.

Within the OECD, all member countries that have a VAT system have implemented rules that reflect the neutrality and destination principles provided in the Guidelines for the determination of the place of taxation for internationally traded services and intangibles. All of them, except Israel, have also implemented mechanisms for the online registration of foreign suppliers (or digital platforms facilitating the supply) that are liable to account for the VAT on those supplies.

Each jurisdiction has implemented these rules in accordance with its own legislative framework. The following paragraphs provide an overview of some of the models for determining the place of taxation and collecting the VAT on internationally traded services that are operated in OECD countries.

In the European Union, the determination of the "place of supply" for services (i.e. the place of taxation) depends on the status of the customer receiving the service and the nature of the service supplied. B2B supplies are in principle taxed at the place where the customer has established its business (or at the place of the fixed establishment of the customer to which it is provided), implementing the destination principle for both supplies within the EU and supplies involving customers or suppliers in third countries. On the other hand, supplies of services to final consumers (B2C supplies) are still taxed at the supplier’s place of establishment as a general rule. This rule does not reflect a will to apply the “origin principle” to B2C supplies but rather the historical reality that most services were consumed where they were provided and it was technically difficult to provide services at a distance to final consumers. There are, however, many exceptions aiming at aligning the place of taxation with the place where consumption is likely to take place. These exceptions include notably the services connected with immovable property, which taxed where the property is located; services relating to cultural, artistic, sporting, scientific, educational, entertainment etc., which are taxed at the place where they are physically carried out; and B2C telecommunication, broadcasting and electronically supplied services, which are taxed where the customer resides (since 2003 for services provided by non-EU suppliers and since 2015 also for EU suppliers). To facilitate compliance by non-EU suppliers, an online digital portal (“One Stop Shop” - OSS) allows suppliers to register at a distance in only one Member State and account in this Member State for the VAT due in all the Member States of the EU where the VAT is due and where the supplier is not established. This regime is operated by the 22 OECD member countries that belong to the EU (Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain and Sweden).

Although this model for determining the place of supply applies in the Member States of the European Union and in a number of other OECD countries such as Norway and Switzerland, it is not the international norm. A number of countries (e.g. Australia, Canada, New Zealand, Singapore, and South Africa) have adopted different models. While the EU model is based on an approach by category of supplies, where a “place of supply” (which is also the place of taxation) is determined for each category according to its nature and the status (business or consumer) of the customer, other models systematically apply a series of proxies for place of consumption or use, to all kinds of services. Such systems work in steps: first a connection with the country is established (e.g. the supplier or the customer are established there; the service is performed or can be acquired there). Then, a number of proxies are applied to determine the actual place of taxation, e.g. a connection with a tangible property; the customer location and/or residence; the location of the person to whom the services are delivered or who uses the service.

For example, in New Zealand (which adopted the GST in 1986) the place of taxation for supplies made by non-residents is generally presumed to be outside New Zealand, except when the service is performed in New Zealand or supplied to a customer who is resident in New Zealand and the recipient is either a final consumer or a registered business who has agreed to have the transaction treated as being made in New Zealand. In contrast, the place of taxation for supplies by residents is presumed to be New Zealand, unless the supply is a zero-rated export of services. These services include international transport and related services; services physically performed outside New Zealand; services supplied to a non-resident who is outside New Zealand at the time the services are performed; services directly in connection with land or goods located outside New Zealand and supplies in relation to intellectual property rights for use outside New Zealand. From 1 October 2016, New Zealand applies GST to supplies of services and intangibles made by non-resident suppliers to final consumers who are usually resident in New Zealand. A simplified digital registration and compliance regime is available to foreign suppliers liable to collect and remit the GST on these supplies.

In Australia (which adopted GST in 2000), supplies are taxable (unless GST-free) in Australia and the GST is collected through the supplier when the supplies are “connected with Australia”. Supplies made through an Australian based business or performed in Australia for a final consumer are connected with Australia. To prevent GST applying to services not consumed or used in Australia, the Australian GST law includes broad, proxy-based zero-ratings (“GST-free”) similar to those used in New Zealand. The Australian GST rules were amended as from 1 July 2017, to make supplies of services and intangibles made by non-residents to final consumers who are residents of Australia generally taxable unless the GST-free provisions apply. A simplified digital registration and compliance regime is available to foreign suppliers liable to collect and remit the GST on these supplies.

In July 2021, Canada has implemented a VAT reform that gives effect to key elements of the OECD Guidelines. From that date onwards, non-resident vendors (or non-resident distribution platform operator vendors) who sell taxable digital products or services, such as online music streaming or traditional services, to Canadian consumers and Canadian entities who are not registered under the normal GST/HST regime must register and account for GST/HST in Canada. Suppliers of short-term accommodation in Canada or accommodation platform operators that facilitate such supplies must also charge and collect the GST/HST on these supplies. A simplified GST/HST registration, reporting and remittance system is available to non-resident vendors (incl. distribution platform operator vendors) to account for the tax due on these supplies.

Annex Table 2.A.8 presents a broad overview of the approaches adopted by OECD countries for collecting VAT on cross-border supplies of services and intangibles from foreign suppliers (i.e. on remote “inbound supplies”).

This overview shows that, according to their common legislative root, the 22 OECD member countries that belong to the European Union determine the place of taxation for cross-border supplies of services and intangibles in principle by reference to the customer’s location (i.e. where the customer has established his business) for B2B supplies and to the customer’s usual residence for B2C supplies, in line with the OECD Guidelines. In these countries, the VAT on inbound supplies is collected through a reverse charge (self-assessment) mechanism for B2B supplies and through a simplified vendor registration and compliance regime (“One Stop Shop”) for B2C supplies.

Twelve other OECD countries use (some variation of) the customer’s location (usual residence, place of VAT registration, head office, etc.) as the main proxy for determining the place of taxation for cross-border supplies of services and intangibles in a B2B and B2C context (Australia, Canada, Colombia, Iceland, Israel, Japan, Korea, New Zealand, Norway, Switzerland, Türkiye and the United Kingdom).

Almost all OECD countries make a distinction between B2B and B2C supplies for determining the place of taxation as well as for determining the mechanism to collect the VAT on supplies by non-resident suppliers. The tax status of customers in this context is generally determined on the basis of the presence of a VAT registration number or on the basis of the customer’s business tax identification number. Two countries (Japan and Korea) distinguish between B2B and B2C supplies on the basis of the nature of the services or intangibles provided. In these countries, supplies of services or intangibles that are considered to be generally used by final consumers such as provision of e-books, digital newspapers, music, videos, games, etc. are deemed to be B2C supplies while others are considered B2B supplies. Only Mexico does not systematically distinguish between B2B and B2C supplies since the supplier must, in principle register and account for VAT in Mexico with respect to both B2B and B2C supplies. However, the business customer is liable to account for the VAT on inbound digital supplies where the foreign supplier has not registered for VAT in the country.

Most OECD countries apply a reverse charge mechanism to collect VAT on inbound B2B supplies of services and intangibles. In Australia, Iceland and New Zealand this mechanism only applies when the customer has a limited right to deduct the input tax, and no tax is due when the customer has a full right to deduction. In Korea, inbound B2B supplies are considered out of scope and no VAT is due on such supplies. In Switzerland, the application of the reverse charge mechanism is limited to situations where the place of taxation is determined according to the customer's residence proxy. When the supply is taxed in Switzerland according to other proxies (e.g. the location of the immovable property to which the supply is connected), the reverse charge mechanism does not apply and the supplier must register in Switzerland according to the standard procedure and account for VAT. In addition, foreign suppliers that are registered in Switzerland to account for VAT on their B2C supplies, must also account for their B2B supplies under that local registration and the reverse charge does not apply.

For remote B2C supplies of services and intangibles by non-resident suppliers, all OECD countries that have implemented place of taxation rules to levy VAT on these supplies as outlined above, require the non-resident supplier to register and account for the VAT, except Israel where the customer is liable to account for the tax on inbound supplies of services and intangibles. A simplified registration and collection regime (without right to deduct input taxes in the taxing jurisdiction - “pay-only registration”) applies in these countries (generally with an option for standard registration), except in Japan and Switzerland where only the standard registration applies (with the right to deduct the input tax incurred in the country) and where the foreign supplier must appoint a local tax agent. Six of the 36 OECD countries requiring foreign suppliers to register to account for VAT on their remote B2C supplies into the country do not impose such a requirement when the annual turnover of these suppliers in the country remains below a threshold that is set at the same level as the registration threshold for domestic taxpayers. These countries are Australia, Canada, Iceland, Japan, New Zealand and Norway.

Chile, Colombia and Costa Rica have implemented a withholding regime whereby financial intermediaries are required to withhold the VAT on payments made for taxable B2C supplies of services and intangibles made by non-resident suppliers that do not comply with their obligations under these countries’ vendor collection regime, as a backstop solution and disincentive to non-compliance.

All countries that operate a simplified registration and compliance regime for the collection of VAT on inbound B2C supplies of services and intangibles by non-resident suppliers have also implemented a full liability regime for digital platforms facilitating these supplies, except Chile, where such digital platforms have only an information provision requirement, and Japan and Switzerland, which require non-resident suppliers to account for inbound B2C supplies of services and intangibles under the standard registration procedure.

The neutrality principles set forth in the OECD Guidelines provide that foreign businesses should in principle not incur irrecoverable VAT in a jurisdiction where they are not established or registered for VAT purposes. However, it is recognised that taxing jurisdictions may limit the scope of a simplified compliance regime to the collection of VAT on B2C supplies by non-resident suppliers without making the recovery of input tax available under this regime. Input tax recovery can remain available for non-resident suppliers under the standard VAT refund or registration and collection procedure. Such an approach may ensure a proper balance between simplification and the needs of tax authorities to safeguard revenue and reduce refund fraud risks. Most non-resident suppliers that register under a simplified compliance regime make online supplies to customers in the jurisdiction where they register without having any physical presence there. They are thus unlikely to incur substantial amounts of input VAT in that jurisdiction. However, it is also recognised that circumstances may arise where a refund of VAT for registrants under the simplified “pay only” regime could be warranted such as, for example overpayments of VAT by suppliers and refunds made by suppliers to their customers after a product recall (OECD/WBG/ADB, 2022[22]).

One of the main ways in which jurisdictions can allow non-resident non-registered (under the standard registration regime) taxpayers to be relieved from the VAT incurred in the jurisdiction is to allow non-resident taxpayers to apply for a VAT refund. Annex Table 2.A.10 shows that most OECD countries with a VAT system allow non-resident businesses to recover the input VAT through a direct refund mechanism. This refund can only be done by way of a GST registration in Australia and New Zealand. In Canada, the supplier to a non-resident business is relieved from the payment of the local GST/HST under certain conditions. Türkiye is the only OECD country that allows VAT refunds to non-resident businesses registered under the simplified registration and compliance regime. By contrast, Chile, Colombia, Costa Rica and Mexico currently do not provide any form of VAT refund or relief to non-resident businesses. In the 22 OECD countries that belong to the European Union, the common legislative root provides that taxpayers that are not established there should be refunded of the input VAT incurred in an EU Member State, under a procedure determined by that Member State and subject to any restrictions that this Member State wishes to apply (e.g. requiring reciprocity or excluding refunds of input VAT incurred on certain types of supplies). The use of the European Union’s simplified registration and collection regime for VAT (often referred to as “One-Stop-Shop”) does not impede this right.

Fourteen OECD countries (Germany, Greece, Hungary, Italy, Korea, Latvia, Lithuania, Poland, Portugal, Slovak Republic, Slovenia, Spain, Switzerland and Türkiye) require that the granting of refunds to non-resident businesses be conditional upon similar relief being granted by the jurisdiction of the foreign business claimant. These requirements for reciprocity generally take two forms: a formal bilateral agreement between jurisdictions or a unilateral decision to recognise jurisdictions considered as having (or not having) appropriate features in their legislation.

2.8.2. Addressing the challenge of VAT collection on imports of “low-value” goods

The term “goods” generally means “tangible property” for VAT purposes. The VAT treatment of supplies of goods normally depends on the location of the goods at the time of the transaction and/or their location as a result of the transaction. When a transaction involves goods being moved from one jurisdiction to another, the exported goods are generally “free of VAT” in the origin’s jurisdiction (and are freed of any input VAT via successive businesses’ deductions of input tax), whilst imports are subject to the same VAT as equivalent domestic goods in the importing jurisdiction. The VAT on imports is generally collected at the same time as customs duties, although in some countries collection is postponed until declared on the importer’s next VAT return. For B2B supplies, the business importing the goods will generally be liable to account for the VAT due on importation. The deduction of the VAT incurred at importation by the importer, in the same way as input tax deduction on a domestic supply, ensures neutrality and limits distortions in relation to international trade. For B2C supplies, in the absence of a business liable to collect the VAT on importation (e.g. the vendor or the carrier), the person liable to pay the VAT is traditionally the recipient of the goods mentioned on the customs declaration.

Until recently, most VAT systems applied a “de minimis” exemption for the importation of relatively low value goods. These exemptions were generally motivated by the consideration that the administrative costs of bringing these low value items into the customs and tax system were likely to outweigh the revenue gained. Until 2018, the vast majority of OECD counties applied such a VAT relief arrangement, with value thresholds under which the VAT was not collected varying from USD 11 in Denmark to USD 200 in Colombia. For European Union countries, legislation in place until 1 July 2021 provided that Member States must exempt from VAT the import of goods whose value does not exceed EUR 10, and are permitted to grant an exemption for imported goods with a value of more than EUR 10 but not exceeding EUR 22. All EU Member States that are members of the OECD had opted for the higher threshold of EUR 22, except Denmark that applied the lower threshold of EUR 10 and France and Poland where there was no threshold for goods imported on mail order. This exemption in the EU did not apply to tobacco or tobacco products and alcoholic products (OECD, 2018[24]).

These VAT exemptions for imports of low value goods become increasingly difficult to bear in the context of the growing digital economy (OECD, 2015[25]). At the time when most low value import relief provisions were introduced, internet shopping did not exist and the level of imports benefitting from the relief was relatively low. In recent years, however, most countries have seen a significant and rapid growth in the volume of low value imports of physical goods from online sales on which VAT was not collected. This resulted in unfair competitive pressures on domestic retailers who are required to charge VAT on their sales to domestic consumers and in decreased VAT revenues for governments. It also created an incentive for domestic suppliers to relocate to an offshore jurisdiction in order to sell their low value goods free of VAT. The 2015 BEPS Action 1 report (OECD, 2015[25]) recognised that the difficulty lies in finding the balance between the need for appropriate revenue protection and avoidance of distortions of competition and the need to keep the cost of collection proportionate to the amounts of VAT to be collected.

The report observed that tax authorities could be in a position to remove or lower their VAT exemption threshold for imports of low value goods, if they were able to improve the efficiency of processing such low value imports and of collecting the VAT on such imports. The report outlines and assesses the main available approaches to address this challenge, noting that a vendor collection model offered the most promising solution. Under this model, the (online) vendor of the low value goods or the digital platform through which these goods are sold is required to register in the jurisdiction of importation and to remit the VAT on these sales in that jurisdiction via the same simplified registration and collection mechanism that is recommended for the taxation of remote supplies of services and intangibles to final consumers (see below). Such a model limits or removes the need for customs authorities to intervene in the collection of VAT collection on the importation of these low value goods, since this VAT is collected directly from the vendor or digital platform at the time of sale. This collection method can apply to goods that are only subject to VAT on importation, which are in practice goods that have a value below the customs “de minimis” threshold (generally significantly higher than the VAT de minimis thresholds). Goods subject to specific duties such as excise would in principle be excluded from the vendor collection approach.

The OECD subsequently complemented the conclusions and recommendation for addressing the VAT challenges of the digital economy included in the 2015 BEPS Action 1 report with further detailed guidance to support their consistent and effective implementation. A first report on “Mechanisms for the effective collection of VAT/GST” (OECD, 2017[20]) includes detailed guidance on the design and implementation of the vendor collection model and on the simplified registration and compliance mechanism. A second report on “The role of digital platforms in the collection of VAT/GST on online sales” (OECD, 2019[21]) provides guidance on the available models for enlisting online marketplaces and other digital platforms in the collection of VAT on e-commerce, focusing in particular on the implementation of the vendor collection mechanism for the effective collection of VAT on imports of low value goods. These reports were further complemented with more detailed guidance aimed at supporting countries for the successful implementation of a comprehensive VAT strategy directed at e-commerce i.e. the VAT Digital Toolkit for Latin America and the Caribbean (OECD/WBG/CIAT/IDB, 2021[23]) and for Asia Pacific (OECD/WBG/ADB, 2022[22]).

Australia was the first country to implement a vendor collection model for the collection of GST on imports of low value goods as of 1 July 2018, in accordance with the OECD guidance. The GST relief for imports of goods with value of AUD 1 000 or less remains in place and no GST on these imports is collected through border processes. A requirement was implemented for foreign vendors and digital platforms that supply more than AUD 75 000 of taxable goods to consumers in Australia per year, to register for GST in Australia and charge the tax on their sales to final consumers in Australia. The GST on the importation of these goods is collected from these foreign vendors through a simplified “pay only” registration regime, in line with OECD guidance. The threshold of AUD 75 000 is the same as the local registration threshold, below which Australian businesses are relieved from the collection of the GST. It aims to relieve small foreign vendors for whom the compliance cost of registering and remitting the GST on their goods sales to consumers in Australia, from the requirement to do so.

New Zealand implemented a similar regime from 1 December 2019, where imports of low-value goods from foreign supplies to final consumers in New Zealand are taxed if the foreign supplier sells goods for more than NZD 60 000 per annum in the country, the same registration threshold as for domestic businesses. The GST relief for imports of goods with value of NZD 1000 or less supplied by foreign vendors to New Zealand final consumers was also repealed from that date. As for remote services, a simplified “pay only” registration is available to foreign suppliers, with the option to do a full registration to claim input credits for business-related purchases sourced from New Zealand. This system is very similar to the Australian system. One important difference is that New Zealand implemented a simplification measure allowing suppliers whose shipments to consumers in New Zealand comprise at least 75 percent of goods below the NZD 1000 threshold, are allowed to make an election to apply the simplified “pay only” regime to the entire shipment, including the goods with a value above NZD 1000.

Under both Australian and New Zealand regimes, goods purchased from abroad via an online marketplace are considered to have been supplied by this online marketplace, which are required to collect and remit the GST on supplies made through them. This requirement also includes so-called “re-deliverers”. This applies when a foreign vendor or a digital platform is requested to deliver the goods outside Australia or New Zealand without knowing that the goods are destined for one of these countries, and the consumer contracts to have those goods re-delivered to Australia or New Zealand. Then the re-deliverer is responsible for the collection of GST on the sale of these goods to the final consumers.

Norway was the next country to implement a vendor collection regime for the collection of VAT on the importation of low value goods in accordance with OECD guidance, as of 1 April 2020. Under that regime, foreign vendors and digital marketplaces that sell goods with value below NOK 3 000 to final consumers in Norway must register and account for VAT under a simplified “pay only” registration regime (VOEC) if they sell goods for more than NOK 50 000 per annum in the country, the same registration threshold as for domestic businesses. The VOEC is not available for goods with value at or above NOK 3 000, foodstuffs, restricted goods, and goods subject to excise duties, which are subject to border collection of VAT, excise duties and customs duties.

Switzerland implemented a regime since 1 January 2019 requiring foreign vendors to register for VAT in the country and to remit to the tax authorities the tax on imports of goods if the vendor's turnover of imports of low value goods exceeds CHF 100 000 per annum (i.e. the same as the domestic registration threshold). In Switzerland, low value goods are defined by the VAT amount due, i.e. when this amount exceeds CHF 5, which means that the value of the goods subject to that regime is of CHF 200 for those subject to the reduced rate of 2.5% and CHF 65 for those subject to the standard rate of 7.7%. Unlike the Australian and New Zealand rules, there is no simplified “pay only” registration available and the vendor must register under the standard registration procedure.

The Member States of the European Union adopted a vendor VAT collection regime as part of the so-called “VAT e-commerce package” (European Commission, 2017[26]). One of the key measures included in this package that entered into force in July 2021 is the removal of the VAT exemption for imports of low-value goods (i.e. goods worth not more than EUR 22) and its replacement with a new regime where vendors have the option to charge and collect the VAT on distance sales of imported low value goods to EU consumers at the time of sale and to declare and pay this VAT through the EU’s online digital portal (Import One Stop Shop; IOSS). These goods will then be exempt from VAT at importation, allowing a fast release at customs. In case where these vendors do not opt for this simplified registration and collection regime, import VAT will be collected from customers by the customs declarant (e.g. postal operator, courier firm, customs agents) which will remit it to the customs authorities via a monthly payment rather than on a transactional basis. These new rules apply to supplies of imported low value goods with a value of EUR 150 or less. Imports of goods above the EUR 150 (customs) threshold will still require a full customs declaration. Where such distance sales are facilitated by electronic marketplaces, these will be considered as the suppliers of the goods for VAT purposes and be liable for collecting and declaring the VAT on these sales. Following the “Brexit”, the United Kingdom has adopted its own regime, applicable from 1 January 2021, where, for goods with a value below GBP 135, the point at which VAT is collected was moved from the point of importation to the point of sale. Foreign vendors or digital platforms where they are involved in facilitating the sale, will be responsible for registering collecting and accounting for the VAT through an online process.

The common features of all these regimes is that the imports of low value goods destined to final consumers are not relieved from VAT any more, in principle placing foreign and domestic vendors of such goods on an equal footing. The VAT is not collected upon importation by customs authorities any more but by the tax administration at the point of sale, i.e. when the good is sold by the foreign vendor or digital platform to the final consumer. Imports of goods that are not considered as “low value” goods i.e. whose value is above the value set by legislation or possibly subject to other taxes such as excise duties are taxed upon importation according to the standard customs procedures.

9 OECD countries still exempt the importation of low-value goods from VAT with widely varying exemption thresholds, i.e. Canada (USD 16), Chile (USD 30), Colombia (USD 200), Costa Rica (USD 500), Iceland (USD 13), Israel (USD 75), Japan (100), Korea (150), and Mexico (USD 50) (see Annex Table 2.A.9).

2.9. Measuring performance of VAT: The VAT Revenue Ratio

VAT performance can be measured through different methods, depending on the dimension of the performance to be measured. It has traditionally been estimated by the “efficiency ratio”, defined as the ratio of VAT revenues to GDP divided by the standard rate (expressed as a percentage). Although the efficiency ratio has been widely used as a diagnostic tool in evaluating VATs, it does not distinguish a product-type VAT from a consumption-type VAT. This limitation can be addressed by taking final consumption as a reference for the potential tax base rather than production (Ebrill, Keen and Perry, 2001[27]). If measured by the ratio of revenue from the tax to the product of the standard VAT rate and aggregate consumption, a benchmark VAT levied at a uniform rate on all consumption would have “C-Efficiency” of 100% provided that all the tax due is collected by the tax administration.

The estimates of the VAT Revenue Ratio (VRR) for OECD countries presented in this section build on the “C-Efficiency ratio” principles. The VRR provides an indicator that combines the effect of loss of revenues as a consequence of exemptions and reduced rates, fraud, evasion and tax planning. Although the VRR has to be interpreted with care and erosion of the tax base may be caused by a variety of factors, it may support policymakers in assessing the revenue raising performance of their VAT system and in identifying opportunities to increase revenue by improving the performance of their VAT regime.

2.9.1. What does the VRR measure?

The aim of the VRR is to provide a measure of the extent to which a VAT regime collects the VAT on the natural base of the tax, i.e. on final consumption expenditure. To achieve this, the VRR estimates the difference, if any, between the VAT revenue actually collected under a country’s VAT regime and what would theoretically be raised if VAT was uniformly applied at the standard rate to the entire potential tax base and all revenue was collected:

$\mathrm{V}\mathrm{R}\mathrm{R}=\frac{\mathrm{V}\mathrm{R}}{\mathrm{B}\mathrm{ }.\mathrm{ }\mathrm{ }\mathrm{r}}$

Where: VR = actual VAT revenues; B = potential tax base and r = standard VAT rate

The ‘standard’ rate refers to the default VAT rate applicable to the tax base, unless otherwise advised by legislation. Legislation can (and many countries do) provide that lower (or higher) rates are applicable to a defined list of products. Reduced VAT rates are still widely used in OECD countries, mainly to pursue equity or social objectives (basic essentials, health, education, etc.). No OECD countries apply higher VAT rates (see Annex Table 2.A.1).

In the VRR calculation formula as presented above, the basis for the potential tax base (B) is the Final Consumption Expenditure under Item P3 in the national accounts (System of National Accounts; SNA). However, as the amount under P3 SNA expresses consumption expenditures at market prices including VAT, this VAT element must be deducted from that amount for the VRR calculation. The theoretical basis for taxation should not include the tax itself. As a result, the VRR estimates presented in Annex Table 2.A.1 have been calculated as follows:

$\mathrm{V}\mathrm{R}\mathrm{R}=\frac{\mathrm{V}\mathrm{R}\mathrm{ }}{\left(\mathrm{F}\mathrm{C}\mathrm{E}-\mathrm{V}\mathrm{R}\right).\mathrm{r}}$

Where: VR = actual VAT revenues; FCE = Final Consumption Expenditure (Item P3 in National Accounts); and r = standard VAT rate.

2.9.2. The challenge of assessing the tax base

The main methodological difficulty in estimating the VRR lies in establishing the potential tax base in a manner that is comparable across OECD countries, as there does not exist a standard assessment of the potential VAT base for all these countries. The potential VAT base in principle includes all supplies of goods, services and intangibles made for consideration (or deemed to be made for consideration) by businesses or by any other entity acting as a business (e.g. individuals, government entities providing supplies for direct consideration, etc.) to final consumers. In principle, the tax base ultimately corresponds to the amount of final expenditure made by households to obtain goods, services and intangibles. In practice, however, many VAT systems impose VAT burden not only on final household consumption, but also on various entities that are involved in non-business activities or in VAT exempt activities (Chapter 1 and this chapter). In such situations, VAT can be viewed as treating such entities as if they were end consumers, or as “input taxing” the supplies made by such entities on the presumption that the burden of the VAT imposed will be passed on in the prices of the outputs of those non-business activities. The tax ultimately collected by the government in these situations is the tax on these inputs.

In the absence of a standard assessment of the potential VAT base for all OECD countries, the closest statistical data that can serve a basis for estimating that VAT base is the final consumption expenditure as measured in national accounts. Final consumption expenditure in national accounts in OECD countries is measured according to the 2008 System of National Accounts (SNA 2008) except for Türkiye, Chile and Japan that continue to use SNA 1993, under Item P3 Final Consumption Expenditure (see also 2.9.2 above).

2.9.3. The average VRR for OECD countries has remained stable

Across the OECD, the unweighted average VRR has remained relatively stable at 0.56 in 2020, up 0.01 from 0.55 in 2019 and at the same level as in 2018 as is shown in Annex Table 2.A.7. This stability of the unweighted average VRR in the first year of the COVID-19 pandemic contrasts with the significant decline of that average during the Global Financial Crisis (GFC) from 0.59 in 2007 to 0.53 in 2009. This average has remained stable around 0.55 since 2010. The unweighted average VRR of 0.56 in 2020 suggests that, on average, an estimated 44% of the theoretical potential VAT revenue is not collected.

The VRR estimates vary considerably across OECD countries. In 2020 the estimates ranged from 0.35 in Colombia, 0.37 in Mexico and 0.38 and Italy, to 0.77 in Luxembourg and 1.01 in New Zealand. An additional four OECD countries have an estimated VRR above 0.65, i.e. Estonia (0.72), Japan (0.71), Korea (0.70) and Switzerland (0.68). All the other countries (31 out of 37) have a VRR below 0.65 and 13 of these countries have a ratio below 0.50 (Belgium, Colombia, Costa Rica, Canada, France, Greece, Iceland, Ireland, Italy, Mexico, Portugal, Spain, Türkiye, United Kingdom). This suggests that a considerable part of the theoretical potential VAT revenue remains uncollected in many OECD countries.

Compared to 2018, the VRR declined in 18 countries in 2020. The biggest decline was seen in Iceland, of where the estimated VRR decreased by 0.8 points from 0.54 to 0.46. Other relatively big drops were observed in Greece and Slovenia, which both saw their estimated VRR decline by 0.6 points from 0.44 to 0.38 and from 0.60 to 0.54 respectively.

The impact of the decreases of the estimated VRR in these 18 countries on the OECD average was offset by the increase in 13 countries between 2018 and 2020, in particular in New Zealand (from 0.95 to 1.02), Netherlands (0.53 to 0.58) and Australia (from 0.47 to 0.51). The VRR estimates remained unchanged in 4 countries in 2020 compared to 2018: Germany (0.57), Hungary (0.59), Poland (0.51) and Switzerland (0.68).

The VRR levels notably reflect the fact that preferential treatments, such as reduced rates and exemptions, continue to be widely used in OECD countries (see Annex Table 2.A.2 and Annex Table 2.A.3). No direct correlation is observed between the level of the standard VAT rate and the VRR. Countries with very different VAT rates may have comparable VRRs. Australia and Poland, for example, have very different standard VAT rates (10% and 23% respectively) and the same VRR estimate (0.51). Although two thirds of countries (24 out of 37) have a VRR between 0.45 and 0.65, they have standard VAT rates that vary widely from 5% (Canada) to 25% (Denmark, Norway, and Sweden) and 27% (Hungary). These last four countries combine relatively high standard VAT rates (25% and 27%) with a VRR above the OECD average, at respectively 0.64, 0.60, 0.60 and 0.59; while Mexico and Türkiye combine lower standard VAT rates (respectively 16% and 18%) with a VRR estimate considerably below the OECD average (respectively 0.37 and 0.34).

Figure 2.4. VAT Revenue Ratio 2020

Türkiye: VRR for 2019

Source: Author's work.

Statlink

The respective weight of the different factors that affect the VRR may vary widely across countries depending on the circumstances. The two countries with the highest VRR, New Zealand and Luxembourg, have an estimated VRR of 1.02 and 0.77, which is far above the unweighted OECD average of 0.56 and significantly above any other OECD country. The behind these high ratios are very different.

The VRR for Luxembourg continued to increase constantly between 2000 (0.66) and 2014 (1.15). This increase was correlated with deep changes in the EU market, in particular the liberalisation of financial services and the boom of e-commerce. It is reasonable to assume that these market factors and the specific VAT treatment of these markets have had a strong upward effect on Luxembourg’s VRR. It may be assumed that Luxembourg’s position as an international financial centre has resulted in additional VAT revenue for the country. The supply of financial services is generally exempt from VAT in Luxembourg without the right to deduct the input tax, in accordance with EU VAT rules, including when supplied to customers in other EU Member States. This means that the non-deductible VAT incurred by financial service providers in Luxembourg increases Luxembourg’s VAT revenues while a large share of the corresponding final consumption occurs in other EU Member States, as a result of the increased cross-border trade in financial services. Luxembourg had also become an international centre for e-commerce, notably as a consequence of the VAT treatment of this activity under EU VAT legislation until 1^st January 2015. According to this legislation, e-commerce supplies to final consumers in other EU Member States were taxed in the Member State where the supplier was established. The low standard VAT rate in Luxembourg, the lowest in the EU (at 15 % until 2014), acted as an incentive to e-commerce suppliers to establish in Luxembourg; and this generated additional and continuously increasing revenue for the country as digital trade continued to grow. This changed as of 1 January 2015. Since that date, intra-EU e-commerce sales to final consumers are no longer subject to VAT in the Member State where the supplier is established (which was often Luxemburg). These sales are now subject to VAT in the Member State of these consumers’ residence and at the rate applicable in that Member State. The loss of VAT revenues for Luxemburg from this change of the intra-EU place of taxation rules for e-commerce is reflected in the VRR estimates for Luxembourg, showing a decline of 0.41 points from 1.15 in 2014 to 0.74 in 2015.

The factors underlying the constant very high VRR since the implementation of the VAT (GST) in New Zealand are very different from those in Luxembourg. First, unlike Luxembourg, New Zealand operates a very broad GST tax base with limited exemptions (see Annex Table 2.A.3) at a single 17% rate with very limited application of a zero rate (see Annex Table 2.A.2). Second, New Zealand treats public services as GST taxable (see Chapter 1). Although this does not generate actual additional revenue (the GST charged by public bodies to the government is compensated through budgetary transfers and the GST collected on local government activities is included in local taxes), this increases the recorded GST revenues, which has an upward effect on the VRR. On the other hand, the potential GST base determined on the basis of national accounts data (see section above) does not include the value added by the government. The combination of these factors may explain why the VRR for New Zealand is so high and even sometimes above 1.

At the opposite end, Mexico and Colombia have the lowest VRR in 2020 (0.37 and 0.35 respectively) amongst OECD countries. This is likely to be due to a combination of factors such as the scope of VAT exemptions, the application of a domestic zero rate and relatively low compliance levels.

2.9.4. A number of factors influence the VRR

In theory, the closer a country’s VAT system is to a “pure” VAT as a broad-based tax on all final household consumption, the closer its VRR is to 1. A VRR close to 1 can be taken as an indicator of a VAT bearing uniformly on a broad base with effective tax collection. A lower value reflects such factors as the effects of reduced rates, exemptions or a failure to collect all tax due. A VRR above 1 is possible in theory, for instance under a broad-based VAT regime with a single standard rate that exempts certain activities without a right to input-VAT deduction (e.g. financial services), where the impact of the non-deductible input tax generates VAT revenue that exceeds the revenue foregone from exempting these activities (e.g. due to cascading or to “input-taxation” of exports). In practice, the VRR rarely equals 1 and a number of complex factors, alone or in combination, may influence the results positively or negatively. These include:

• The application of lower VAT rates to a number of goods and services and the level of such lower rates that reduce the tax revenue and have a negative impact on the VRR.

• The level of the registration and/or collection threshold under which small businesses are not required to account for VAT. These thresholds reduce the amount of VAT collected, although it could be argued that the adverse revenue consequences of such thresholds may remain limited since the businesses under the thresholds will generally not be able to deduct any input VAT and their overall value added be relatively modest.

• The presence and scope of exemptions. Depending on the features of the exemptions and market structures, exemptions may influence the VRR upwards or downwards. Exemptions may reduce the tax revenue when the exemption applies to goods or services directly supplied to final consumers without requiring much investment or expenditure other than the supplier’s own labour. They may increase revenue when the exemption occurs early in a supply chain and the revenue arising from the non-recoverable input VAT and its cascading through the value chain exceeds the potential tax arising from taxation at standard rates with the deduction of input tax. The application of a VAT exemption for financial services in particular may have a considerable impact on the VRR, given the economic importance of this sector in many countries.

• The VAT treatment of public sector activities. Final consumption by government is the second largest category of final use in national accounts after household consumption. Government activities are exempt or outside the scope of VAT in most countries, New Zealand being the notable exception treating all government activities as taxable. As a consequence, public bodies can generally not deduct the input VAT paid on their taxable expenditure, again with the exception of New Zealand that provides a full right to deduct input tax for government activities. A number of countries have created mechanisms for balancing the adverse effects of the exemption of public sector activities, such as targeted VAT refunds, full or partial right to deduct input VAT, budgetary compensations or extended taxation of government activities. The different options chosen by governments may have varied impacts on the VRR. Compensations outside of the VAT system (e.g. a simple budgetary compensation) have no direct effect on the VRR. The government activities remain input taxed, generating the corresponding VAT revenue, before and after the compensation measures. A measure that provides the right to input-VAT deduction to government bodies will normally reduce VAT revenue if the outputs remain exempt, and hence influence the VRR downwards. Applying VAT to government activities like New Zealand does, on the other hand, will increase the amount of VAT collected and influence the VRR upwards, as it results in the taxation of the total government output rather than just the inputs.

• The implementation of an effective regime for the collection of VAT on online supplies of goods, services and digital products by foreign vendors and electronic marketplaces. Many VAT regimes have struggled to ensure the proper collection of VAT on online trade, in particular when faced with the challenge of collecting these taxes from non-resident vendors, which has caused increasingly important revenue losses as the value and volume of digital trade has continued to increase (see Chapter 1).

• The capacity of the tax administration to manage the VAT system efficiently and the degree of compliance by taxpayers influences the VRR, as losses of VAT revenue from non-compliance and fraud obviously have a negative impact on a country’s VRR. Also the level of taxpayer insolvencies and bankruptcies can influence the VRR.

• The failure of a tax administration to operate an appropriate VAT refund process (with timely refunds of excess input-VAT credits to domestic businesses and/or refunds to non-resident businesses), may influence the VRR upwards for the “wrong” reasons, as it is contrary to the fundamental principle of VAT-neutrality.

• Similarly, the failure of a VAT regime to ensure that the exportation of goods and/or services is treated as “free of VAT” (i.e. zero-rated), notably because it levies VAT on exports or exempts exports without a right for the exporter to recover the associated input-VAT, may influence the VRR upwards “for the wrong reasons”.

• Finally, also the possible differences in the measurement of final consumption expenditure in national accounts across countries and thus in countries’ potential VAT base should be taken into account when interpreting the VRR.

For further technical discussion on the factors influencing the calculation of the VRR see (OECD, 2016[28]).

2.9.5. Policy and compliance factors influencing the VRR

The level of the VRR rarely depends on one factor in isolation but rather on the interaction between them. For example, a high standard rate may create an incentive for evasion while multiple lower rates may lead to revenue loss due to misclassifications. Exemption of certain sectors of activity may create distortions and incentives for avoidance, which require additional administrative capacities that cannot be used for the efficient VAT collection. Inefficient tax administration, burdensome administrative requirements and complex VAT mechanisms may reduce taxpayer compliance levels.

These potentially influencing factors can be divided in two main categories:

• Those directly resulting from policy decisions mainly affecting the tax base or the coverage of the standard rate (i.e. reduced VAT rates and exemptions – “policy gap”), and

• Those related to the efficiency of the tax collection and compliance levels (“compliance gap”).

The VRR is a combination of the result of policy decisions and the “compliance gap”. Analysis to further break down the composition of the VRR can be carried out. One method to decompose the VRR into its policy and compliance components is to first use tax expenditure data from VAT preferential regimes (i.e. the revenue cost of a system’s departure from the application of the standard VAT rate to the entire theoretical tax base) to estimate the “policy gap”. The remaining difference between 1 and a given country’s VRR, after deducting the estimated “policy gap”, then provides an estimate of the “compliance gap”. However, given the number of other factors that may influence the VRR, such figures should be used with caution.

Another method is to estimate the “compliance gap” (or “VAT gap”), i.e. the difference between the VAT collected and the tax that should be collected if all consumers and businesses fully complied with a given jurisdiction’s VAT rules. This method is employed for the annual VAT Gap estimates in the European Union where the VAT Gap is defined as the difference between the amount of VAT actually collected and the theoretical tax liability according to tax law (VAT Total Tax Liability; VTTL). (Institute for Advanced Studies, 2015[29]). (CASE – Center for Social and Economic Research, 2020[30]). This VAT Gap is estimated using a “top-down” approach that applies a jurisdiction’s respective VAT rates to the relevant components of consumption (including final consumption of households; final consumption of government and non-profit institutions; intermediate consumption for partially exempt businesses; expenditure on housing; country-specific adjustments, etc.). Australia uses a similar method (Australian Taxation Office, 2020[31]). The International Monetary Fund RA-GAP framework (Hutton, 2017[32]) uses national accounts data to calculate the potential VAT base per economic sector. It calculates the potential VAT revenues for a given VAT system by applying its current tax schedule (exemptions, zero-rates, reduced rates) to that VAT base. Potential VAT revenues under the reference policy are calculated by applying the current standard VAT rate to the base. The VAT gap is calculated by comparing actual VAT revenue with potential revenues under the current policy and under the reference policy.

2.10. Combatting VAT non-compliance and fraud

There is no common OECD definition of concepts such as VAT “non-compliance” or “fraud”. For the purpose of this publication, a distinction is made between “unintentional non-compliance” resulting from a taxpayer’s unawareness of its compliance obligations or its incapacity to comply, e.g. due to unclear or inconsistent rules; “intentional non-compliance”, i.e. the deliberate failure by taxpayers to meet their VAT obligations with a view to reduce or to avoid VAT liability; and “fraud” involving illegal arrangements with as main objective to steal public money, such as fake invoicing, carousel fraud, etc. These categories are not air-tight and criminal VAT fraud mechanisms can be dissimulated behind or be connected with genuine trade activities.

2.10.1. VAT revenue losses from fraud and non-compliance remain significant

Reducing the revenue losses from VAT fraud and non-compliance remains a key challenge and a priority for countries around the world. Many tax administrations carry out research to estimate their country’s VAT compliance gap, i.e. the revenue loss from VAT fraud, non-compliance and bankruptcies. The VAT Gap in the European Union (EU) was estimated at EUR 134 billion in nominal terms and at 10.3 percent expressed as a share of the VAT Total Tax Liability (VTTL) in 2019, down by approximately 0.8 percentage points from the 2018 estimates (Poniatowski, 2021[33]). The smallest VAT Gaps in the EU were observed in Croatia (1 percent) and Sweden (1.4 percent); the largest in Romania (34.9 percent), Greece (25.8 percent), and Malta (23.5 percent). Advanced estimates for 2020 forecast a reversal of the downward trend, with a potential loss of EUR 164 billion in 2020 due to the impact of the COVID-19 crisis on the economy. The United Kingdom estimated its VAT Gap at GBP 8.6 billion in 2020-21, i.e. 6.7% of the VTTL (HMRC, 2022[34]), declining from GBP 10.0 billion and 7.0% of the VTTL in 2018-19. A number of other OECD countries provide public estimates of their VAT gap. In Australia the GST gap is estimated for 2019–20 at AUD 53 billion, i.e. 7.8% of the VTTL (Australian Taxation Office, 2021[35]); in Canada, the GST/HST gap for 2018 is estimated at CAD 4.3 billion and 9% VTTL (Canada Revenue Agency, 2022[36]). In Latin America, the VAT gaps showed a wide diversity in 2017 (CEPAL, 2020[37]) but OECD countries in this region had a relatively low VAT gaps compared to other countries in the region, i.e. 21.4% in Chile, 23.6% in Colombia, 16.4% in Mexico and 31.1% in Costa Rica (compared to e.g. 45.3% in Panama and 43.8% in the Dominican Republic).

In addition to unintended and intended non-compliance, VAT systems are the target of organised criminal attacks. The most common type of organised VAT fraud is the “missing trader” or “carousel” fraud. It arises when a business makes a purchase without paying VAT (typically a transaction for which tax self-assessment applies), then collects VAT on an onward supply and disappears without remitting the VAT collected. Originally, the fraud involved primarily high-value goods that can easily be moved across borders, such as computer chips and cell phones - but it expanded to services that can be bought and sold like goods. Organised VAT fraud in CO₂ emission trading, for instance, caused billions of Euros of VAT revenue losses in a range of countries. Energy markets are also vulnerable to organised VAT fraud. European energy regulators, energy trading firms and gas and electricity operators notably warned EU authorities about the serious impact of VAT carrousel fraud on the functioning of European gas and electricity markets (Europex – Association of European Energy Exchanges, 2018[38]). They reported signs of "a major penetration of the gas and electricity markets by VAT fraudsters”. Networks involved in such organised and criminal VAT fraud are often also active in money laundering, corruption and other crime types (EU SOCTA, 2021[39]).

As economic activity continues to evolve, so do the risks of VAT fraud and non-compliance that VAT administrations are facing. Research in the past for instance showed that certain accounting software products contained hidden tools (zappers) for the manipulation of VAT receipts (OECD, 2013[40]). The digitalisation of the economy creates increasingly important risks of VAT fraud and non-compliance and new challenges for tax administrations to address them, notably in light of the exponential growth of cross-border e-commerce and the growing capacity of online operators to carry out activities in a given jurisdiction without needing any physical presence there (OECD, 2015[41]). Activities supported by new technologies, such as those involving crypto-currencies and Non Fungible Tokens (NFT), may also create new risks of VAT fraud and non-compliance and challenges for tax administrations’ traditional VAT compliance risk management.

2.10.2. Reducing VAT non-compliance and fraud remains a priority for tax authorities

Countries are increasingly implementing measures to enhance VAT compliance and to reduce the vulnerability of VAT regimes to non-compliance and fraud, in particular in the context of the digitalisation of the economy. These measures include on the one hand the implementation of alternative collection mechanisms such as domestic reverse charge mechanisms and VAT split payment regimes; and, on the other hand, as the implementation of data collection regimes, including though electronic invoicing and data reporting requirements, to support VAT risk management through advanced data analysis. While these strategies can significantly enhance tax administrations’ VAT enforcement capacity, they increasingly require the effective international administrative cooperation in the area of VAT, given the globalisation and digitalisation of the economy (and of VAT fraud networks).

Almost all OECD countries apply domestic reverse charge measures to limit fraud risks in sectors that may be particularly vulnerable to VAT fraud

In a standard VAT regime, the tax is collected from suppliers through a staged process whereby the supplier collects the VAT from its customer and remits it to the authorities after having deducted any recoverable input VAT (see Chapter 1). Under a domestic reverse charge mechanism, the liability for remitting the VAT to the tax authorities is shifted from the supplier to its business customer (i.e. in B2B transactions). Shifting the VAT liability from the supplier to the customer for domestic transactions removes the possibility for dishonest suppliers to disappear with VAT that they collected from their customers without remitting it to the tax authorities, which is for example typical for so-called “missing trader” fraud. Nor can businesses claim the deduction or refund of VAT they have not paid (e.g. VAT on false invoices) or that has not been remitted to the tax authorities, which typically occurs in “carrousel fraud” schemes.

OECD countries that are using the domestic reverse charge mechanism have typically limited its application to economic sectors that are particularly vulnerable to organised fraud schemes such as trade in mobile phones; integrated circuit devices; game consoles; tablet PCs and laptops; cereals and industrial crops; raw and semi-finished metals; gas and green electricity certificates; and telecom services.

No OECD country operates a more generalised reverse charge regime for the collection of all VAT on domestic transactions between businesses. Although this would reduce the risks of specific fraud types, as described above, it would also create new complexity for businesses and tax administrations and growing risks of other types of fraud at the retail level (e.g. sales suppression, misuse of VAT identification numbers). One concern is that it would effectively transform the VAT into a retail sales tax, with the concentration of all revenue risks at the stage of the final sale or at a limited number of points, with the inherent weaknesses of such a system.

In the European Union, Member States can apply a domestic reverse charge mechanism to a determined list of supplies, on an optional and temporary basis. EU Member States have also been allowed since 2013 to apply a domestic reverse charge to any kind of supply in case of sudden and massive VAT fraud.

Annex Table 2.A.12 shows that the use of domestic reverse charge as a means of combatting VAT fraud is widely used in the 22 OECD countries that are Member States of the European Union, in particular for the supply of CO₂ emission certificates (all except Estonia, Latvia, Lithuania and Poland); scrap materials and waste (all except Belgium, Luxembourg and Poland); and construction work (all except Estonia, Luxembourg and Poland). The domestic reverse charge is also applied by many EU countries for supplies of gold (14 EU countries); electronic devices such as laptops, chips, mobile phones etc. (11 EU countries) and the supply of gas and electricity to taxable dealers (10 EU countries). Also other OECD countries use a domestic reverse mechanism albeit to a much lesser extent, i.e. Canada (supplies of real property by non-residents and some supplies between provinces); Chile (supplies of rice, construction works, waste and certain plants and animals); Israel (metal debris); Mexico (waste, some supplies made by individuals); New Zealand (supplies of land incorrectly zero rated); Norway (supply of CO₂ emission allowances and investment gold) and Türkiye (some supplies made by non-taxable persons). Chile also require certain (large) taxpayers to reverse charge the VAT on B2B supplies acquired from suppliers considered as not trustworthy by the tax administration. More than half of the OECD countries operating a VAT (23 out of 37) apply the reverse charge to supplies in the real estate sector.

No domestic reverse charge measures have been implemented in Colombia, Costa Rica, Iceland, Japan, Korea, and Switzerland. Poland replaced its domestic reverse charge arrangements with a mandatory split payment mechanism in November 2019 (see below).

The split payment mechanism applies to a more limited extent

Another means of reducing the vulnerability of VAT regimes to fraud and non-compliance is through the implementation of a so-called split payment (or withholding) mechanism. Under such a mechanism, the supplier charges the VAT on its domestic supplies to the customer according to normal rules, but the VAT paid by the customer (or part of it) is either directly remitted to the tax authorities (“withholding scheme”) or deposited on the supplier’s special VAT account (“split payment”) rather than to the supplier. The supplier can generally use the amounts deposited in its special VAT account under a split payment regime only to pay VAT either to the tax administration or to another supplier (and to this supplier’s VAT account only). Poland, which operates such a split payment regime (see previous section), has extended the possible use of amounts on special VAT accounts to pay certain other public levies.

A split-payment or withholding regime has a similar fraud-prevention effect as a domestic reverse-charge mechanism in that it removes the possibility for a supplier to collect the VAT without remitting it to the tax authorities. Among the drawbacks of these regimes are the added complexity (incl. the requirement for suppliers to determine for each transaction whether or not it is in the scope of the regime) and the cash-flow impact for businesses, which can be significant particularly under a withholding regime as businesses receive no/less output VAT against which they can offset deductible input-VAT (and this could result in a perennial excess-input VAT position). Some have observed that split-payment mechanisms may not prevent more complex missing trader frauds (Bartosz Gryziak, 2020[42]). Annex Table 2.A.12 shows that such a regime has been implemented in only five OECD countries and these are all targeted at specific sectors or types of supplies.

Colombia and Italy apply the split payment mechanism to supplies made to public authorities, government bodies and public owed companies. In Colombia the split payment also applies to supplies made to listed large businesses.

In Poland, a mandatory split payment mechanism applies to business-to-business (B2B) supplies of a defined list of goods and services that are considered to be sensitive to fraud (such as fuels, steel products, scrap metal, of CO₂ emission allowances, mobile phones, tablets, construction services etc. which were previously subject to a domestic reverse charge), if the invoiced gross amount exceeds PLN 15 000. Korea applies a split payment regime to supplies of gold, copper and scrap gold and iron. Australia requires purchasers of new residential property to effectively withhold GST from payment to the supplier and to remit the full amount of the GST to the tax authority. This is reconciled against taxable amounts of GST required to be reported for these supplies by the supplier.

In the Czech Republic such a system is only optional for customers that wish to avoid possible joint and several liability for the supplier’s unpaid taxes. Türkiye operates a partial withholding regime whereby customers are required to withhold a percentage of the VAT charged to them by suppliers and remit it directly to the tax authorities for supplies in certain sectors, such as construction, scrap metal, glass, plastic and paper, advisory and audit services, some repair services etc.

Research (Deloitte, 2017[43]) has shown that, although a split payment regime could help combatting non-compliance and fraud in the EU, it may have a negative cash-flow impact on businesses and possibly increase their compliance costs, depending on business size and sector, which could lead to any additional revenue not outweighing its costs.

2.10.3. Digital reporting requirements are on the rise

Over the last decade, a range of incremental changes occurred across tax administrations which, taken together, are changing the nature of the tax compliance environment, allowing for more targeted and managed compliance (OECD, 2017[44]). A significant part of this change is driven by the increased availability of data. As digitalisation proceeds, even more tax related data from taxpayers and third parties is becoming available (for example, data from e-invoicing, automated transaction data reporting, online cash registers and financial account information), which is contributing to more targeted actions by tax administrations (OECD, 2022[17]).

OECD countries generally use technology to enhance the reporting of relevant data to tax authorities. After a generalisation of mandatory e-filing of VAT returns (OECD, 2015[45]), many OECD countries have introduced or consider introducing a requirement for taxpayers to provide transaction data to tax authorities (Transaction-Based Reporting – TBR), sometimes in real time. These measures typically require detailed information to be provided in an electronic format at individual taxable transaction level. This information can include invoicing information and accounting data or any other information that allows tax authorities to monitor supplies made and/or received by individual taxpayers and determine their tax liability.

TBR requirements in OECD countries, where they exist, are heterogeneous and can differ on several dimensions such as their scope, the data collected or the frequency of reporting. Annex Table 2.A.11 shows that most OECD countries have now implemented mandatory electronic transaction information reporting obligations (i.e. the transmission of detailed information in an electronic format on individual taxable transactions), except Belgium, Canada, Finland, Iceland, Japan and Switzerland. Amongst the countries that have implemented mandatory electronic transaction information reporting obligations, 20 impose a more or less detailed specific format for such reporting (Chile, Colombia, Costa Rica, Czech Republic, Estonia, France, Greece, Israel, Italy, Korea, Lithuania, Luxembourg, Mexico, Netherlands, Norway, Poland Portugal, Slovak Republic, Slovenia, Spain and Türkiye). Seven of them (France, Lithuania, Luxembourg, Netherlands, Norway, Poland and Slovenia) use (a variation of) the Standard Audit File for Tax (SAF-T) format developed by the OECD Forum on Tax Administration (OECD, 2005[46]). This involves the use of accounting software to create an electronic file (the SAF-T) containing tax-relevant accounting data. The SAF-T format enables the transfer of these data from the taxpayer to the tax authorities in a standardised electronic format.

More than half of the countries requiring electronic transaction reporting (18 out of 31) require the systematic transmission of such information to the tax administration (Austria, Chile, Colombia, Costa Rica, Czech Republic, Estonia, Greece, Hungary, Israel, Italy, Korea, Lithuania, Mexico, Poland, Portugal, Slovak Republic, Spain and Türkiye) and 10 out of these countries require this transmission to happen in (near) real time (Chile, Colombia, Costa Rica, Greece, Hungary, Italy, Korea, Mexico, Spain and Türkiye). Such electronic transaction reporting may involve the mere transmission of data to the tax administration - the “Transmission model” - or a validation system where each transaction data must be systematically cleared by tax authorities for the invoice emitted by the supplier related to this supply to be considered a valid accounting document - the “Clearance model”. Among the OECD countries requiring the systematic transmission of transaction data to the tax administration, 8 countries have reported the use of a form of Clearance model: Chile, Colombia, Costa Rica, Greece, Italy, Korea, Mexico and Türkiye. In all these countries, the clearance model is coupled with a real time reporting obligation

Countries are also increasingly concerned with the monitoring of transactions in cash in the business-to-consumer (B2C) environment and more than one third of OECD countries having a VAT (16 out of 37) have implemented requirements for suppliers to use electronic cash registers (Austria, Belgium, Costa Rica, Czech Republic, France, Greece, Hungary, Israel, Italy, Korea, Latvia, Norway, Poland, Slovak Republic, Slovenia, and Sweden). Five of these countries require the systematic transmission of such data to the tax administration (Greece, Israel, Korea, Slovak Republic and Slovenia) and this in (near) real time for Korea, Slovak Republic and Slovenia.

Another trend that is observed is the progressive digitalisation of invoices. For the purposes of this publication two kinds of dematerialised invoices are considered: “electronic invoice” that is a digital file allowing the automated exchange of invoice information between accounting systems of parties to a transaction; and “digitised invoice” that is a mere copy of an invoice (e.g. in pdf format) sent by electronic means (e.g. by email) between parties to a transaction. Annex Table 2.A.11 shows that, although electronic invoicing is now permitted in all OECD countries, it is still only mandatory in 10 of them. Among these countries, Austria, Portugal and France require it only for B2G (Business to Government) transactions, while Korea, Mexico, Norway and Türkiye require it for B2B and B2G supplies. On the other hand, electronic invoicing is mandatory for all invoices, including B2C, B2B and B2G supplies in Chile, Colombia, Costa Rica and Italy. France will however progressively introduce mandatory electronic invoicing for B2B supplies between 2024 (for large businesses) and 2026 (small businesses). The obligation to allow reception of invoices in electronic format will be mandatory on 1 July for all businesses, regardless of their size, as soon as their supplier is obliged to issue invoices in electronic format.

The implications of these different TBR regimes on businesses and tax administrations are different depending on the type of reporting. Under a Periodic Transaction Controls (PTCs) system transactional data reported to tax authorities at regular intervals can complement or be joined to the existing VAT return. Continuous Transaction Controls (CTCs) systems, in which transactional data is submitted electronically to tax authorities just before, during or shortly after the actual exchange of such data between the parties, are radically different and require more automation in an appropriate IT environment (Luchetta, 2022[47]). From a pure technical perspective, automatic transaction reporting systems are separate from the digitalisation of accounting documents or invoicing rules and don’t necessarily require the invoice as exchanged between the supplier and the customer to be in electronic format. However, tax authorities, in their efforts to gain more control over VAT revenue sources and prevent fraud may extend their mandates to cover more fiscal documents in the mandatory electronic transmission (Christiaan van der Valk, 2023[48])

Much is likely to depend on the design of these digital reporting requirements and on the performance of tax authorities’ online services and their technological capacity to minimise risks these new requirements adversely affect economic activity, including in a cross-border context. In addition, tax authorities will need to manage and analyse an unprecedented volume of data, to be stored in a secure environment. In order for countries to take full advantage of the opportunities that such data collection provides, citizens and businesses need to have confidence in the security and confidentiality of the information gathered. Facing the risks of inappropriate disclosure of information whether intentionally or by accident (e.g. hacking of tax administration databases), countries must ensure that both the legal framework and appropriate data protection systems are in place (OECD, 2012[49]).

2.10.4. Tax authorities are increasingly implementing or exploring strategies to manage VAT compliance risks in digital trade

The continuously expanding internet penetration and the continuously growing ease for consumers worldwide to shop online and to make use of online payment solutions, including through mobile devices, have been among the key drivers of an extraordinary increase in digital trade over the last decade. Its steadily increasing relevance for VAT revenues and its potential competitive impact on traditional “brick-and-mortar” businesses have triggered reform in jurisdictions worldwide to ensure that VAT is collected effectively on digital trade. In particular, a growing number of countries have implemented solutions for the collection of VAT from non-resident suppliers based on OECD standards and guidance or are in the process of doing so (see Section 2.8 above). These OECD standards and guidance mainly aim at achieving high levels of compliance by “making it easy to comply” for business involved in digital trade, including for small and medium enterprises.

Despite the efforts of tax authorities to facilitate VAT compliance in digital trade, non-compliant conduct will inevitably occur. This calls for the implementation of effective strategies to manage and counter risks of VAT fraud and non-compliance in digital trade. Early OECD analysis suggests that the patterns of VAT compliance risks associated with digital trade are not significantly different from those observed in traditional trade. Some of the specific features of digital trade can however exacerbate these compliance risks and create additional challenges for tax authorities to manage them. These may include limitations to tax administrations’ audit and risk detection and management capabilities and processes, challenges to access relevant information, and limitations to the capacity to enforce compliance against economic operators in digital trade that may often have no physical presence in the taxing jurisdiction.

Tax authorities are therefore exploring a range of strategies, tools and technologies to adjust their VAT compliance risk management approaches to the digital trade context. Data collection and management are at the heart of strategies to detect VAT non-compliance and fraud in digital trade and VAT risk management strategies. As part of its programme of work, the OECD Committee on Fiscal Affairs is undertaking work to enhance tax authorities’ capacity to tackle VAT fraud and non-compliance in digital trade, including through the analysis, experience sharing and development of guidance on enforcement strategies to support the effective collection of VAT on digital trade and the exchange of information and other forms of administrative cooperation in the area of VAT.

2.10.5. International administrative co-operation is critical for the effective management of international VAT risks

Greater need for administrative co-operation to tackle VAT fraud and non-compliance

Governments increasingly recognise that information exchange and administrative co-operation play a critical role in tax administrations’ strategies to ensure the effective collection of VAT and to tackle VAT fraud and non-compliance in international trade and in, not least in the context of the digitalisation of the economy (OECD, 2015[41]); (Court Auditors, 2015[50]). This need was notably highlighted in the 2015 OECD Report on Tax Challenges Arising from Digitalisation (OECD, 2015[25]) and the OECD is carrying out work in this context.

A number of instruments are available that provide the legal foundation for the international administrative co-operation, including the exchange of information, in the area of VAT. These include the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (OECD/Council of Europe, 2011[51]); the bilateral treaties implementing the current Articles 26 and 27 of the OECD and UN Model Tax Conventions; and Tax Information Exchange Agreements (TIEAs) based on the OECD Model. Regional agreements can also provide a legal base for such co-operation. These include EU Regulation No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax; the Nordic Mutual Assistance Convention on Mutual Administrative Assistance in Tax Matters; the CIAT Model Agreement on the Exchange of Tax Information; and the African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters is the most comprehensive instrument available for administrative co-operation

Amongst these instruments, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention) (OECD - COE, 2008[52]) has the widest coverage both in terms of membership (as of November 2022, 146 jurisdictions participate in the Convention) and in scope. The Convention was developed jointly by the Council of Europe and the OECD. It was opened for signature by the member states of both organisations in 1988. It was then aligned with the internationally agreed standard on transparency and exchange of information and opened to all countries in 2011.

It provides for all possible forms of administrative co-operation between the Parties (Article 1) in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. The Convention has a very wide scope and covers all forms of compulsory payments to general governments (i.e. the central government and its political subdivisions) with the sole exception of customs duties and all other import-export duties.

The Convention explicitly includes VAT among the taxes covered by its provisions (Article 2.1.b). It should be noted though that Article 30 of the MAAC allows the subscribing jurisdictions to reserve the right not to provide any form of assistance in relation to the taxes of other Parties in any of the categories listed in Article 2.1.b, which includes general consumption taxes such as VAT. Prior to sending an assistance request based on the Convention, jurisdictions are therefore advised to check the existence of reservations for the assistance related to VAT.

The main types of administrative co-operation tools under the Convention are:

• Exchange of information on request (Art. 5). At the request of the applicant State, the requested State shall provide the applicant State with any information that is foreseeably relevant for the administration or enforcement of their domestic laws concerning the taxes covered by the Convention which concerns particular persons or transactions (Art. 5, § 1). If the information available in the tax files of the requested State is not sufficient to enable it to comply with the request for information, that State shall take all relevant measures to provide the applicant State with the information requested (Art. 5, § 2).

• Automatic exchange of information (Art. 6). Two or more Parties shall automatically exchange information with respect to categories of cases and in accordance with procedures, which they shall determine by mutual agreement.

• Spontaneous exchange of information (Art. 7). A Party shall, without prior request, forward to another Party information of which it has knowledge in the circumstances set forth in Art. 7, § 1.

• Simultaneous tax examinations (Art. 8). A simultaneous tax examination is an arrangement between two or more Parties to examine simultaneously, each in its own territory, the tax affairs of a person or persons in which they have a common or related interest, with a view to exchanging any relevant information which they so obtain (Art. 8, para 2).

• Tax examinations abroad (Art. 9). At the request of the competent authority of the applicant State, the competent authority of the requested State may allow representatives of the competent authority of the applicant State to be present at the appropriate part of a tax examination in the requested State. All decisions with respect to the conduct of the tax examination shall be made by the requested State.

• Assistance in recovery (Chapter III, Section II, Art. 11-16). Under Article 11, § 1, at the request of the applicant State, the requested State shall take the necessary steps to recover tax claims of the first-mentioned State as if they were its own tax claims, except in relation to time-limits which are governed solely by the laws of the applicant State (Art. 14) and in relation to priority (Art. 15). This shall apply only to tax claims, which form the subject of an instrument permitting their enforcement in the applicant State.

• Service of documents (Chapter III, Section III, Art. 17). At the request of the applicant State, the requested State shall serve upon the addressee documents, including those relating to judicial decisions, which emanate from the applicant State and which relate to a tax covered by the Convention.

However, Article 30 of the Convention also enables a State to put reservations about the type of assistance to be provided, so that it may limit its participation in the provision of mutual assistance, including in the VAT area.

Annex Table 2.A.13 shows that all OECD countries have signed the Convention and it has entered into force in all of these countries. Three OECD countries (Israel, Luxembourg and Switzerland) have expressed a general reservation on VAT and do not provide any kind of assistance in this area under the Convention. A limited number of other OECD countries have made reservations on specific components of administrative co-operation in the area of VAT, i.e. on the assistance in the recovery of VAT claims (Austria, Canada, Chile, Colombia Costa Rica, Germany and the United States) and on the provision of assistance in the service of documents (Chile, Colombia Costa Rica, and the United States).

The European Union has adopted a range of tools for the exchange of information and other types of administrative cooperation in the area of VAT

Within the European Union, the VAT Directive (2006/112/EC) and implementing Regulation (904/2010) provide the legal base for the administrative co-operation and exchange of information among Member States. It is supported by an operational network of tax officials, Eurofisc. Based on the information shared within the Eurofisc network, and after analysis of the available data, Eurofisc liaison officials can take appropriate action at national level, including requests for information, audits or deregistration of VAT numbers. The implementing Regulation was amended in 2018 to improve the exchange and analysis of information between the Member States’ tax administrations and with law enforcement bodies. The EU also signed a bilateral agreement on the VAT exchange of information with Norway in February 2018.

The VAT e-commerce package applicable from 1 July 2021, which removes the VAT exemption on imports of low value goods and obliges suppliers to pay the VAT on all goods imported into the EU, was accompanied by reinforced co-operation provisions between tax and customs authorities. Eurofisc has also strengthened its co-operation and exchange of information with the European Anti-Fraud Office (OLAF) and Europol.

On 18 February 2020, the European Council adopted a legislative package (EU Council Directive 2020/284 and Council Regulation 2020/283) that will require payment service providers to transmit information on cross-border payments originating from Member States and on the beneficiary (“the payee”) of these cross-border payments. Under this package, payment service providers offering payment services in the EU will have to monitor the payees of cross-border payments and transmit information on those who receive more than 25 cross-border payments per quarter to the administrations of the Member States This information will then be centralised in a European database, the Central Electronic System of Payment information (CESOP), where it will be stored, aggregated and cross-checked with other European databases. All information in CESOP will then be made available to anti-fraud experts of Member States via a network called Eurofisc. The objective of this new measure is to give tax authorities of the Member States the right instruments to detect possible e-commerce VAT fraud carried out by sellers established in another Member State or in a non-EU country. The measure respects the data protection rules. Only information related to payments that are likely to be connected to an economic activity is transmitted to the tax authorities. Information on consumers and on the reason underlying the payment is not part of the transmission. The transmission of data must start on 1 January 2024.

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[22] OECD/WBG/ADB (2022), VAT Digital Toolkit for Asia-Pacific, OECD, Paris, https://www.oecd.org/tax/consumption/vat-digital-toolkit-for-asia-pacific.htm.

[23] OECD/WBG/CIAT/IDB (2021), VAT Digital Toolkit for Latin America and the Caribbean, https://www.oecd.org/tax/consumption/vat-digital-toolkit-for-latin-america-and-the-caribbean.htm.

[33] Poniatowski, G. (2021), VAT gap in the EU : report 2021, European Commission, Directorate-General for Taxation and Customs Union.

[3] Thomas, A. (2020), “Reassessing the regressivity of the VAT”, OECD Taxation Working Papers, No. 49, OECD Publishing, Paris, https://doi.org/10.1787/b76ced82-en.

Annex 2.A. Data on VAT rates and structures

Annex Table 2.A.1. VAT Rates

Country	VAT Implemented	Standard VAT rates1										Reduced VAT rates2	Regional VAT rates
		2005	2008	2011	2014	2017	2018	2019	2020	2021	2022	2022	2022
Australia	2000	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	0	-
Austria*	1973	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	(0.0)/10.0/13.0	19
Belgium*	1971	21.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	0.0/6.0/12.0	-
Canada*	1991	7.0	5.0	5.0	5.0	5.0	5.0	5.0	5.0	5.0	5.0	0	13.0/15.0
Chile	1975	19.0	19.0	19.0	19.0	19.0	19.0	19.0	19.0	19.0	19.0	-	-
Colombia*	1983	16.0	16.0	16.0	16.0	19.0	19.0	19.0	19.0	19.0	19.0	0.0/5.0	0
Costa Rica	2019							13.0	13.0	13.0	13.0	(0.0)/1.0/2.0/4.0
Czech Republic*	1993	19.0	19.0	20.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	(0.0)/10.0/15.0	-
Denmark*	1967	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0	-
Estonia*	1992	18.0	18.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	0.0/9.0	-
Finland*	1994	22.0	22.0	23.0	24.0	24.0	24.0	24.0	24.0	24.0	24.0	0.0/10.0/14.0	-
France*	1968	19.6	19.6	19.6	20.0	20.0	20.0	20.0	20.0	20.0	20.0	2.1/5.5/10.0	0.9/2.1/10.0/13.0 & 1.05/1.75/2.1/8.5
Germany*	1968	16.0	19.0	19.0	19.0	19.0	19.0	19.0	19.0 (16.0)	19.0	19.0	(0.0)/7	-
Greece*	1987	18.0	19.0	23.0	23.0	24.0	24.0	24.0	24.0	24.0	24.0	6.0/13.0	4.0/ 9.0/17.0
Hungary*	1988	25.0	20.0	25.0	27.0	27.0	27.0	27.0	27.0	27.0	27.0	(0.0)/5.0/18.0	-
Iceland	1990	24.5	24.5	25.5	25.5	24.0	24.0	24.0	24.0	24.0	24.0	0.0/11.0	-
Ireland*	1972	21.0	21.0	21.0	23.0	23.0	23.0	23.0	23.0 (21.0)	23.0 (21.0)	23.0	0.0/4.8/9.0/13.5	-
Israel*	1976	17.0	15.5	16.0	18.0	17.0	17.0	17.0	17.0	17.0	17.0	0	0
Italy*	1973	20.0	20.0	20.0	22.0	22.0	22.0	22.0	22.0	22.0	22.0	(0.0)/4.0/5.0/10.0	-
Japan	1989	5.0	5.0	5.0	5.0	8.0	8.0	8.0	10.0	10.0	10.0	8	-
Korea	1977	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	10.0	0	-
Latvia*	1995	18.0	18.0	22.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	(0.0)/5.0/12.0	-
Lithuania*	1994	18.0	18.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	5.0/9.0	-
Luxembourg*	1970	15.0	15.0	15.0	15.0	17.0	17.0	17.0	17.0	17.0	17.0	3.0/8.0/14.0	-
Mexico*	1980	15.0	15.0	16.0	16.0	16.0	16.0	16.0	16.0	16.0	16.0	0	8
Netherlands*	1969	19.0	19.0	19.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	9	-
New Zealand	1986	12.5	12.5	15.0	15.0	15.0	15.0	15.0	15.0	15.0	15.0	0	-
Norway*	1970	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0/12.0/15.0	-
Poland*	1993	22.0	22.0	23.0	23.0	23.0	23.0	23.0	23.0	23.0	23.0	5.0/8.0	-
Portugal*	1986	19.0	21.0	23.0	23.0	23.0	23.0	23.0	23.0	23.0	23.0	6.0/13.0	4.0/9.0/16.0 & 5.0/12.0/22.0
Slovak Republic*	1993	19.0	19.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	10	-
Slovenia*	1999	20.0	20.0	20.0	22.0	22.0	22.0	22.0	22.0	22.0	22.0	5.0/9.5	-
Spain*	1986	16.0	16.0	18.0	21.0	21.0	21.0	21.0	21.0	21.0	21.0	(0.0)/4.0/10.0	0.0/0.5/1.0/3.0/4.0/5.0/6.0/7.0/8.0/9..0/9.5/10.0/15.0/20.0
Sweden*	1969	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0/6.0/12.0	-
Switzerland	1995	7.6	7.6	8.0	8.0	8.0	7.7	7.7	7.7	7.7	7.7	0.0/2.5/3.7	-
Türkiye*	1985	18.0	18.0	18.0	18.0	18.0	18.0	18.0	18.0	18.0	18.0	1.0/8.0	-
United Kingdom*	1973	17.5	17.5	20.0	20.0	20.0	20.0	20.0	20.0	20.0	20.0	0.0/5.0	-
Unweighted average		17.8	17.7	18.6	19.1	19.3	19.3	19.1	19.2	19.2	19.2

Notes:

* See country note.

1. Yearly data: the standard VAT rates shown in the table are rates applicable on 1 January of each year. VAT rates in italics between brackets indicate a temporary reduction of the standard rate during the year considered, even if its application has started after the 1^st January of the year considered and/or has ceased before its end.

2. Reduced VAT rates and specific regional VAT rates are those applicable as at 1 January 2022. Reduced VAT rates include zero-rates applicable to domestic supplies (i.e. an exemption with right to deduct input tax). They do not include zero-rated exports or other supplies subject to similar treatment such as international transport or supplies to embassies, international organisations and diplomatic missions. Reduced VAT rates in italics and between brackets indicate temporary reductions of the VAT rates typically in the context of the COVID 19 pandemic or to counter rising energy costs (i.e. a specific temporary reduced rate created for the circumstance and only applicable to certain commodities in the context of the COVID 19 pandemic or to counter rising energy costs.). On the other hand, the temporary extension of the scope of existing reduced VAT rates to certain categories of products is not indicated in this table. Details on the application of reduced rates are included in country notes to Annex Table 2.A.2.

VAT rates changes or adoption of new VAT rates introduced after 1 January 2022 are mentioned in the country notes to this table.

Historical data on VAT rates is available at https://www.oecd.org/ctp/tax-policy/tax-database/.

Source: National delegates.

Statlink

Annex Box 2.A.1. Country notes to Annex Table 2.A.1

Austria*. A standard rate of 19% applies in Jungholtz and Mittleberg. Specific temporary reduced VAT rates apply in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Belgium*. Specific temporary reduced VAT rates apply in the context of the COVID-19 and rising energy costs – See country note to Annex Table 2.A.2.

Canada. The following provinces have harmonised their provincial sales taxes with the federal Goods and Services Tax and therefore levy a GST/HST at the following rates: New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island: 15%; and Ontario: 13%. Québec applies GST at a rate of 5% and Québec Sales Tax at a rate of 9.975% (applied on the same tax base as the GST). With the exception of Canada’s territories (Yukon, Northwest Territories and Nunavut) and the province of Alberta, other Canadian provinces apply a provincial sales tax to certain goods and services in addition to the federal GST.

Colombia. Specific reduced VAT rates apply in the context of the COVID-19 pandemic – See country note to Table 2.2. The rate of 0% applies to hygiene products destined to final consumers in the department of Amazonas.

Costa Rica. Specific reduced VAT rates apply in the context of the COVID-19 pandemic – See country note to Table 2.2.

Czech Republic*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Estonia*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Finland*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

France*. Rates of 0.9%; 2.1%; 10.0%; 13.0% and 20.0% apply in Corsica; rates of 1.05%; 1.75%; 2.1% and 8.5% apply to overseas departments (DOM) excluding French Guyana and Mayotte. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Germany*. The standard VAT rate was reduced from 19% to 16% and the reduced VAT rate from 7% to 5% from 1 July to 31 December 2020. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Greece*. Specific regional rates of 4.0%; 9.0% and 17.0% apply in the islands of Leros, Lesbos, Kos, Samos and Chios and the decision to reduce the rates is automatically revoked 3 months from the closure of Reception and Identification Centres and Temporary Reception / Hosting Structures and Closed Controlled Structures for refugees. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Hungary*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Ireland*. The standard VAT rate was reduced from 23% to 21%, with effect from 1 September 2020 until 28 February 2021. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Israel. The rate of 0% applies when an Eilat resident dealer buys goods from Eilat non-residents. Supplies made by an Eilat resident supplier (to be consumed in Eilat) are exempt from VAT.

Italy*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Latvia*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Lithuania*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Luxembourg*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Mexico. A reduced VAT rate of 8% applies in the northern border region (Ensenada, Playas de Rosarito, San Quintín, San Felipe, Tijuana, Tecate and Mexicali in the state of Baja California; San Luis Río Colorado, Puerto Peñasco, General Plutarco Elías Calles, Caborca, Altar, Sáric, Nogales, Santa Cruz, Cananea, Naco and Agua Prieta in the state of Sonora; Janos, Ascensión, Juárez, Praxedis G. Guerrero, Guadalupe, Coyame del Sotol, Ojinaga and Manuel Benavides in the state of Chihuahua; Ocampo, Acuña, Zaragoza, Jiménez, Piedras Negras, Nava, Guerrero and Hidalgo in the state of Coahuila de Zaragoza; Anáhuac in the state of Nuevo León; and Nuevo Laredo, Guerrero, Mier, Miguel Alemán, Camargo, Gustavo Díaz Ordaz, Reynosa, Río Bravo, Valle Hermoso and Matamoros in the state of Tamaulipas) from 1 January 2019 until 31 December 2024. Furthermore, it applies in the southern border region (Calakmul and Candelaria in the state of Campeche; Balancán and Tenosique in the state of Tabasco; Ocosingo, Palenque, Marqués de Comillas, Benemérito de las Américas, Amatenango de la Frontera, Frontera Comalapa, La Trinitaria, Maravilla Tenejapa, Las Margaritas, Suchiate, Frontera Hidalgo, Metapa, Tuxtla Chico, Unión Juárez, Cacahoatán, Tapachula, Motozintla and Mazapa de Madero in the state of Chiapas; and Othón P. Blanco in the state of Quintana Roo) from 1 January 2021 until 31 December 2024.

Netherlands*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Poland*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Portugal*. In the Islands of Azores, the standard VAT rate is 16% and the reduced rates are 4% and 9%. In the Islands of Madeira, the standard rate is 22% and reduced rates are 5% and 12%. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Slovak Republic*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Slovenia*. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic and to counter rising energy costs – See country note to Annex Table 2.A.2.

Spain*. Rates of 0.0%, 3.0%; 5.0%, 7.0%, 9.50%; 15.0% and 20.0% apply in the Canary Islands. Rates of 0.5%; 1.0%, 2.0%; 3.0; 4.0%; 5.0%; 6.0%; 8.0%; 9.0% and 10% apply in either Ceuta or Melilla. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Sweden. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

Türkiye. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

United Kingdom. Specific temporary reduced VAT rates in the context of the COVID-19 pandemic – See country note to Annex Table 2.A.2.

*Member States of the European Union apply a customs duties and VAT exemption for the importation of certain goods needed to combat the effects of the COVID-19 outbreak (Commission Decision (EU) 2021/2313). For more details, see country notes to Table 2.2.

Note: Temporary VAT rate reductions applicable in the context of the COVID-19 or energy crises are shown in italics in the country comments above. More details on temporary application of reduced VAT rates applicable in the context of the COVID-19 or energy crises are shown in country notes to Table 2.2.

Annex Table 2.A.2. Application of Reduced VAT Rates

Country	Reduced VAT rates, including domestic zero rate1
Australia	0%: most basic food and beverages for human consumption; most health and medical supplies (including certain menstrual products); some education courses and students accommodation; some child care services; some religious services; some activities of charitable institutions; water (except supplied in, or transferred to, a container less than 100L); sewerage and drainage; sales of businesses as going concerns; precious metals (first supply after refinement); grants of freehold and similar interests by governments; supplies of farm land; cars for use by disabled people subject to a (general) threshold of AUD 59 136; supplies of accommodation and meals to residents of retirement villages by certain operators; certain government services; some telecommunication supplies made under arrangements for global roaming in Australia; international mail; eligible emissions units (all international emissions units and Australian carbon credit units issued before 9 February 2015, and certain types of Australian carbon credit units issued after that date, under the Carbon Credits (Carbon Farming Initiative) Act 2011).
Austria*	10%: food; water supply; pharmaceuticals; passenger transport (except domestic flights); books; newspapers and periodicals; e-books and e-publications; pay television; some supplies of artists, writers and composers; forestry; restaurants (except beverages); letting of immovable property for residential use, hotel accommodation, camping; collection of domestic waste and street cleaning; sewage; supply of sanitary towels and sanitary tampons; repair services of bicycles, shoes and leather goods, clothing, and household linen. 13%: supply of wine by producing farmers; agricultural supplies; some supplies of artists, writers and composers; admission to cultural, sporting events and cinemas; domestic flights.
Belgium*	0%: cars for disabled persons; certain newspapers and periodicals; certain recovered materials and by products. 6%: food; some beverages; water supply; pharmaceuticals; feminine hygiene products and external defibrillators; equipment for the disabled; passenger transport; books; newspapers and periodicals; certain electronic publications and e-books; culture; sport; works of art, collector’s items and antiques; works of art delivered by their authors/creators; some products and services supplied by organisations with a social purpose; agriculture; hotel accommodation and camping sites; renovation of dwellings over 10 years old; private homes and establishments for disabled; subsidised social housing; some labour intensive services (small repair services); reconstruction subsequent to demolition works leading to the construction of new private housing (under strict conditions and specific limitations as to the amount); funeral services; cut flowers and plants; buildings dedicated to education and pupil guidance. 12%: restaurants (except beverages); certain energy products (coal, coke; lignite); certain social housing; some products for plants protection for agricultural purposes; tyres for agricultural vehicles.
Canada	0%: prescription medicine, basic groceries; certain financial services provided by financial institutions (usually to non-residents); certain agricultural and fishing products; certain medical devices; international bridge or tunnel authorities (on certain purchases only); precious metals; sales of 25 cents or less made through mechanical coin-operated devices.
Chile	-
Colombia	0%: food for human consumption; some health products such as medicines, antibiotics and blood, medical consultations, diagnostic images; books and newspapers; personal hygiene products. Military and police weapons and ammunition; fuel alcohol; solar panels; public transportation vehicles for small entrepreneurs that have up to two vehicles; clothes, bicycles, motorcycles, construction materials, medicines (for humans and animals). 5%: certain agricultural products; agricultural equipment; some electric or hybrid vehicles and some of their auto parts; storage of agricultural products; agricultural and health insurances; safety and cleaning services; wine and liquors; some food products; aviation fuels.
Costa Rica*	0%: books; services rendered for cultural radio stations; private education services when they are rendered by preschool, middle school, high school, college and any other education institution supervised by the Superior Education Counsel. 1%: basic basket of consumer goods and services (it includes certain food items of mass consumption); articles for personal hygiene and cleaning, home care goods; school supplies; some veterinary products and agricultural and fishing supplies. 2%: medicines; private education services; personal insurance premiums. 4%: private health services; local and international flight tickets.
Czech Republic*	10%: essential child nutrition; gluten-free products; certain pharmaceutical products; certain printed books; certain electronic publications and e-books; passenger transport; water; collection and treatment of waste and waste water; restaurant and catering services; domestic care services; cleaning in private households; domestic care services; hairdressing; repairs of clothing, shoes and leather goods; accommodation, admission to cultural events and facilities, admission to sporting events and use of sporting facilities. 15%: food; pharmaceutical products; books and e-books (when not subject to the lower rate of 10%); some beverages; water supply; medical services (if not exempt); equipment and repair for the disabled; passenger transport; art; cultural services; newspapers and periodicals; construction of private dwellings and social housing; renovation and repair of private dwellings; collection and treatment of waste and waste water; hotel accommodation; health care and domestic care services; cleaning in households; funeral services; sport activities; agricultural products; cut flowers and plants; heating.
Denmark*	0%: newspapers and periodicals. 5%: first time sale of products of artistic work valued over DKK 300 000 (the standard rate of 25% applies to 20% of the tax base resulting in an effective rate of 5%).
Estonia*	0%: certain commercial aircraft and sea-going vessels and certain supplies of goods and services related to them; international transport of passengers. 9%: pharmaceuticals; medical equipment or devices for disabled; books; newspapers and periodicals; certain electronic publications and e-books; hotel accommodation.
Finland*	0%: printing services for certain membership publications; certain vessels. 10%: pharmaceuticals; passenger transport; books, subscribed newspapers and periodicals; certain electronic publications and e-books; hotel accommodation; admission to cultural, entertainment and sporting events and cinema performances; use of sports facilities; works of art supplied by their creators or imported; copyrights to literary and artistic works; TV license fees; supply of services by athletes and performing artists, provided that they have opted for VAT liability. 14%: food; non-alcoholic drinks; animal food; restaurants (except alcoholic beverages).
France*	2.1%: newspapers and periodicals; pharmaceuticals. 5.5%: most food products and beverages (except alcoholic beverages); water supply; equipment for the disabled; books and e-books; admission to cultural services; work on dwellings over 2 years old under certain conditions; domestic care services; subscription fees to natural gas and electricity networks; district heating; supplies of works of art by their creators; women's sanitary products; some social housing. 10%: passenger transport; social housing; admission to exhibitions, sites and facilities of a cultural, recreational, educational or professional nature; pay TV; domestic care services; restaurant services and catering (except alcoholic beverages); hotel accommodation; farm products; gardens, plants and flowers; treatment of waste; sewage; passenger transport; author's rights.
Germany*	7%: food; water supply; equipment for the disabled; medical services (if not exempt); books and newspapers; certain electronic publications and e-books; plants; flowers; certain cultural events; museums; zoos; circuses; charitable work (if not exempt); author's rights; local public passenger transport within a municipality or if the distance covered is not more than 50 km; long-distance rail travel; hotel accommodation; cut flowers and plants; works of art supplied by their creator or successors in title and importation of collectors’ items; feminine hygiene products; long-distance travel by rail.
Greece*	6%: pharmaceutical drugs and vaccines for human medicine; books and versions thereof, optical or acoustic, recorded on a hard disk and on electronic devices; picture books for children; newspapers, journals and periodicals; admission to theatres (theatrical plays) and concerts, supply of natural gas and electricity; district heating; the performance of certain radiotherapy operations; electronically supplied services of e-books and audio books other than publications wholly or predominantly devoted to advertising and other than publications wholly or predominantly consisting of video content or audible music; handwritten or printed music, illustrated or not even knit; preparations and reagents used in human medicine; white sticks and typewriters with Braille characters designed to serve the visually impaired; feed, waste and scrap of industrial foodstuffs; corn; fertilizers. 13%: basic food goods (meat and abattoir by-products; meat preparations; fish, squid, octopus and cuttlefish excluding livers, eggs and semen; milk and dairy products; birds eggs; natural honey; vegetables, plants, some types of roots and tubers; animal food falling within CN code 230990, oil cake, seeds for sowing; fruit and nuts; cereal; flour and flour products; olive oil; pasta not baked or stuffed or otherwise processed; bread; fruit and vegetable juices excluding the undermentioned subject to the standard rate: most types of processed food, farm supplies that are usually intended to be used as intermediate inputs by farmers and farm industries (excluding capital goods such as machinery or buildings); live plants and their roots, cuttings and slips; pharmaceutical products (besides those subject to 6%); medical equipment and other appliances for the disabled persons (besides those subject to 6%); intrauterine contraceptives; catheters; feeding syringes; talking sphygmomanometers; needles for insulin pens and dialysis needles; water supply; accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites;, juices and beverages; domestic care services such as home help and care of young, elderly, sick or disabled; services by retirement homes and establishments for disabled and mentally retarded persons or persons suffering from mental disorders or substance abuse insofar as those transactions are subject to VAT and not exempt as welfare or social security work; the provision of services for farming production(excluding capital goods such as machinery or buildings); infant food and other baby products, such as diapers and car seats; bicycle helmets.
Hungary*	5%: pharmaceuticals for humans; certain equipment for the blind; books, newspapers and sheet music; live pigs and carcasses of pig; certain live cattle, sheep, lamb, goat, and their meat in bulk; meat of domestic pig; meat and edible offal of poultry; fresh eggs; fresh milk; edible offal and inner parts of domestic swine; live fish (excluding ornamental fish) and the body/parts/fillet of fish for human consumption; district heating; services supplied by performing artists; internet access services; restaurant meals and supply of non-alcoholic beverages prepared on site; provision of accommodation; sale of new dwellings (either house or flat, not exceeding 300 or 150 m2 respectively), sale of new dwellings constructed on brownfield sites. 18%: milk and dairy products; products containing cereals, flour, starch or milk; certain open-air concerts.
Iceland	0%: shipbuilding and maintenance of ships and aircraft; services to foreign fishing vessels related to landing and sale of fish in Iceland; direct payments to farmers. 11%: food and beverages; passenger transport (if not exempted); services of travel agencies, travel organisers and touring associations; travel guidance; books including music books and e-books; audio recordings of books. CDs and similar media with text as well as electronic version of such books; magazines, newspapers and countryside- and district newspapers with text as well as electronic version of such papers and magazines; periodicals with text as well as electronic version of such periodicals; subscriptions to radio and TV; rental of hotels, guestrooms and other guest services; hot water, electricity and fuel oil used for the heating of houses and swimming pools; admission tolls to land transportation projects; CD disks, records, magnetic tapes and other similar means of music recordings, other than visual records. Electronic version of music other than visual; condoms; diapers for children; admission fees to bathhouses, bathings, saunas and spas (if not exempted); contraceptive products and feminine hygiene products.
Ireland*	0%: books and certain printed matter; children's clothing and footwear; oral medicine; certain medical equipment; certain food products; seeds for food production; fertilisers; certain animal foodstuffs; supply of sanitary towels and sanitary tampons; certain lighthouse services; certain services relating to aircraft and sea-going vessels; supplies of certain candles. 4.8%: livestock and horses for food or agricultural production. 9%: certain food and drink; newspapers and certain periodicals, e-books; certain electronic publications; promotion, admission to, and showings of, shows, exhibitions or cultural facilities; hotel and holiday accommodation; provision of sporting facilities; certain hairdressing services. 13.5%: waste disposal; energy for heating and light; fuel for certain purposes; gas; electricity; building services; immovable goods and certain services related to immovable goods; concrete works; repair services; tour guide services; photographic prints; works of art; antiques; literary services; short-term car and boat hire; driving instruction; veterinary services; jockey services; certain plants and flowers; seeds for plants and flowers; medical services (if not exempt); admission to cinemas/certain musical performances; holiday accommodation; restaurant/hotel meals; certain agricultural services; certain hairdressing services.
Israel	0%: hotel accommodation for foreign tourists and another hotel services (serving food and beverage, laundry, pool, gym, etc.); sale of an intangible asset to a foreign tourist, tickets for an international conference in which more than 50 foreign tourists are in attendance; rental of a private motor vehicle to a tourist to drive himself; transportation of tourists in a private motor vehicle, a bus or an airplane; hospitalization of a foreign tourist; sale of fruits and vegetables; sale of dealer's/dealers' assets to a company in exchange for the company's stock only, provided that the dealer/dealers owns 90%, or more, of the voting power immediately after the assets transfer; sale of all of the company's assets to its shareholders in a liquidation process, in which, the assets are divided amongst the said shareholders in proportion to the shares respectively held by them; supplies of goods to who would be exempted from sales tax due to entry to Israel (supplies of certain goods to new immigrants and to students returning from study abroad); sale of a real estate by a non-profit organization or by a financial institution to a non-profit organization or to a financial institution as part of restructuring; renting exhibition space by non-resident; services given by an Israeli production company to a non-resident for film production in Israel; services given to a non-resident in respect of human clinical trials; an Eilat resident dealer buys goods from an Eilat non-resident; rendering services to foreign residents, except when the services were effectively rendered in connection with an asset located in Israel or when an Israel resident also benefits from the service.
Italy*	4%: certain food; medications and health products/services and equipment for the disabled; supply of services for certain residential housing constructions; books; newspapers; weekly magazines; supply of food by schools, canteens and soup kitchens. 5%: aromatic herbs, fresh or chilled truffles, social and health service for the elderly, drug addicts, migrants, prisoners, handicapped, AIDS patients, transport services on urban waterways (see, river, lake or lagoon); compostable feminine hygiene products. 10%: certain food and beverage, water supply; pharmaceutical products (for humans and animals); feminine hygiene products; medical services (if not exempt); passenger transport; combustible gas for cooking; mineral oil; electricity; gas; urban waste; purification stations; livestock meat and fish; renewable-source energy; works of art; admission to shows and cultural events; letting of immovable property by building enterprises; renovation and maintenance work for residential housing; restaurants; construction of urban development; hotel and similar accommodation services.
Japan	8% food, beverages (excluding alcoholic beverages and eating-out services) and certain newspapers under subscription.
Korea	0%: supply of certain machinery and materials for agriculture; fishery; livestock and forestry; supply of mineral oil used for certain purposes in agriculture, fishery and forestry; certain equipment for the disabled.
Latvia*	12%: medicinal products; medical devices; food for infants; pharmaceutical products; inland passenger transport services; hotel accommodation; district heating, firewood for household needs. 5%: Certain supplies of fresh fruits, berries and vegetables; books, brochures, booklets and similar printed matter, newspapers, magazines and other periodicals, notices of information agencies intended for public distribution as well as publications on the Internet.
Lithuania*	9%: heating power used for heating residential premises, hot water (including cold water used for preparing hot water and to heating power used for preparation of hot water) supplied to residential premises; books, non-periodical information; inland regular passenger transport; accommodation services; firewood and wood products for heating supplied for domestic energy consumers. 5%: certain medicines and medical aid equipment (including prescription drugs); technical aids for disabled persons and repairs of such aids; newspapers, magazines and periodical publications.
Luxembourg*	3%: food for human and animal consumption; water supply; pharmaceutical products including products used for contraception and sanitary protection; certain medical equipment; certain aids and other appliances normally intended to alleviate or treat disability; passenger transport; accommodation; books, newspapers and periodicals supplied on physical means of support or electronically, but excluding material with predominantly adult content; admission to cultural and sporting events; use of sporting facilities; restaurant services but excluding alcoholic beverages; services by writers, composers and performing artists, or of the royalties due to them; goods and services of a kind normally intended for use in agricultural production; services supplied in connection with waste collection and treatment; children’s clothing and footwear; housing used by the owner, for his own use, as principal dwelling; substantial works on housing used as principal dwelling and (i) constructed more than 20 years prior to the start of the works (ii) newly acquired, the works to be completed in the five years following the acquisition; funeral services; reception of radio and television broadcasting services but excluding exclusively adult content services. 8%: certain labour intensive services; works of art delivered by their authors/creators or by their heirs or imported; gas; electricity; firewood; district heating; flowers and ornamental plants; certain plant protection products allowed for organic production. 14%: certain wines; certain fuels; washing and cleaning products; printed advertising; heat and air conditioning; certain financial services.
Mexico	0%: sale of non-industrialised animals (except dogs, cats and small species used as home pets) and vegetables (except rubber); patent medicines; milk; bottled water; juices, nectar and concentrated fruits and vegetables; ice; food (except sale of processed food in restaurants and food establishments, chewing gum, caviar, smoked salmon, eels, pet food and soft drinks); agricultural equipment; machinery and fishing boats; wholesale of gold; gold bullion (with a content of at least 80% of gold) and jewellery; some agricultural and fishing services; magazines, books and newspapers printed by the taxpayer himself; domestic water supply; hotel services provided to foreign tourists participating in congresses, conventions and trade shows; use of convention centres by event organisers who are residents abroad; call centre services for telephone calls originated abroad, as long as the services are contracted and paid a foreign resident without a permanent establishment in Mexico; and sanitary pads, tampons and cups, for menstrual management.
Netherlands*	9%: food; catering; goods and services for the disabled; medicine; accommodation; books; certain electronic publications and e-books; lending of books; newspapers; magazines; passenger transport (except passenger transport by air); water supply; entrance fees for sports events; amusement; parks; museums; cinemas; zoos and circuses; cut flowers and plants; restaurant and hotel meals; aids for the visually disabled; use of sports accommodation; art and antiques; hotel and holiday accommodation; certain labour intensive services like some specific services for the maintenance and isolation of dwellings; cleaning of dwellings and hairdressing.
New Zealand	0%: supply of taxable activity (business) as a going concern; supply of fine metal (gold, silver or platinum) from a refiner in fine metal to a dealer in fine metal; supply by local authorities of the local authorities petroleum tax; supply of financial services to GST registered businesses. Supply of land by and to a GST registered person when the recipient intends to use it to make taxable supplies and it is not intended to be used as a principal place of residence (this zero-rating between GST-registered persons is equivalent to the domestic reverse charge). Long-term stay in a commercial dwelling; certain services provided as part of the right to occupancy (taxed at the standard rate on 60% of the value of the supply).
Norway	0%: books; newspapers; certain periodicals and publications; certain electronic publications and e-books; electronic news services; electricity and energy supplied from alternative energy sources for household use in the counties of Finnmark, Troms and Nordland; the purchase and leasing/hiring of electric motor vehicles and batteries; second-hand vehicles covered by re-registration tax; supply of certain ships, aircrafts and drilling platforms and hiring out such vessels; services that are directly related to the construction of embassy buildings (to final consumer); goods and services to specific international military forces and command units; supply of taxable activity (business) as a going concern; supply of human organs, blood; supply by funeral directors of services relating to the transportation of deceased persons. 12%: accommodation, passenger transport and transport of vehicles by ferries or other vessels in connection with the domestic road network; public broadcasting; admission to sporting events, museums, cinemas and amusement parks. 15%: food and non-alcoholic beverages.
Poland*	5%: certain foodstuffs (e.g. bread, meat, fish, fruits and vegetables, eggs, dairy products, bakery products, juices); products for children and hygiene products; books and regional or local magazines; e-books (other than publications consisting wholly or predominantly of video content or audible music). 8%: certain foodstuffs; newspapers and periodicals; goods and services of a kind normally intended for use in agricultural production; pharmaceutical products; medical devices; certain disinfectants applied in health protection; transport of passengers and their accompanying luggage; supply of water; admission to shows, theatres, circuses, amusement parks, concerts, museums, zoos, cinemas etc.; reception of radio and television broadcasting services (excluding VOD); supply, construction, renovation, modernization, thermo-modernization, reconstruction or maintenance works of buildings or parts thereof included in buildings covered by the social housing program;; maintenance of private dwellings; accommodation provided in hotels and similar establishments; restaurant and catering services; admission to sporting events and use of sporting facilities; funeral services; supply of services provided in connection with street cleaning, refuse collection and waste treatment, other than the supply of such services by public bodies; lending in libraries of books and newspapers; some labour intensive services; animal feeding stuffs; veterinary services; certain equipment for blind persons and certain animal semen (as of 31 August 2020).
Portugal*	6%: essential food; water supply; pharmaceutical products; devices for the disabled; medical services (if not exempt); books, newspapers and periodicals; certain electronic publications and e-books; passenger transport; hotels and similar services; social housing; fixed component of natural gas supplies in lower pressure contracts (10 000 m3) and fixed component of electricity supplies in lower power contracts (3.45 kVA); some goods used in agriculture; certain agriculture products and certain agriculture services; home care services for elderly people, children and drug addicts, as well as phone assistance services to elderly people or chronically ill patients; admission to cultural events as well as to admissions to exhibitions, zoos, parks, aquariums, museums and buildings of national interest. 13%: some other food; still wine; diesel fuel for agriculture; machinery mainly used in agricultural production; restaurant services; supply of electricity for consumption, excluding its fixed components, for a contracted power that does not exceed 6.90 kVA, in the part that does not exceed a certain volume.
Slovak Republic*	10%: certain food; radioactive elements and isotopes and compounds for health service; pharmaceutical products; diagnostic or laboratory reagents; certain medical and sanitarian means; printed books and newspapers, brochures, leaflets and similar printed matter; picture books, drawing or painting templates for children; printed music; orthopaedic appliances; contact and spectacle lenses; certain means for blind and partly blind persons, hard-of-hearing persons and hard health-disabled persons; accommodation services. Goods and services supplied to an eligible authorised customer, within the social economy activities by a registered social enterprise.
Slovenia*	9.5%: foodstuff (for human and animal consumption); preparation of food; water supply; medicine, devices for the disabled; passenger transport; admission to cultural and sporting events; authors rights; import and supply of certain works of art, collectors’ items or antiques; social housing; renovation and maintenance work of residential housing not provided as part of a social policy; livestock and certain supplies in connection with agricultural production; hotel accommodation; restaurant (except beverages); use of sporting facilities; supplies by undertakers and cremation services; public hygiene services; window-cleaning and cleaning in private households; minor repairing of bicycles, shoes and leather goods; domestic care services; hairdressing; cut flowers and plants. 5%: books, including books form libraries, newspapers and periodicals.
Spain*	4%: basic foodstuff ( bread, flour, milk, cheese, eggs, vegetables and fruit); certain supplies to the disabled (e.g. wheelchairs or cars); medicines and other medical devices for human use (e.g. lenses); books, newspapers and periodicals; certain electronic publications and e-books; supply of new buildings for social housing and social accommodation; supply of dwelling to certain house lease entities. 10%: foodstuff (for human or animal consumption); water supply; medicines for animal use; certain medical equipment and certain pharmaceutical products; passengers transport; sale (also restoration or construction works under conditions) of building or parts of buildings susceptible of use as private housing; minor works on private housing; restaurants and catering; certain cultural and entertainment services; hotel accommodation and alike; amateur sport events; commercial fairs; animals as well as agriculture and forestry products for obtaining foodstuffs; goods and services used in agricultural, livestock and forestry undertakings, including flowers and plants; waste treatment; cleaning of public sewage; burial services; cleaning and maintenance services of public areas.
Sweden*	0%: commercial aircraft and ships and certain services related to these; aircraft fuel; prescribed medicine; printing of certain membership publications. 6%: passenger transport; books, newspapers and magazines, including in electronic format; certain electronic publications and e-books; culture (theatre, cinema, etc.); authors rights; zoos; commercial sports events; commercial museums, exploitation of natural areas, parks and nature reserves. 12%: food and restaurants services; accommodation; works of art owned by the originator; import of antiques, collectors’ items and works of art; repair of bikes, shoes and other leather goods and household linen.
Switzerland	0%: Supply of services by travel agents and organisers of events, if they make use of supplies of goods and services by third parties that are provided abroad; certain supplies of goods and services to international airlines; state minted gold coins, fine gold for investment purposes and gold destined for refining or recovery. 2.5%: tap water; food; cattle; poultry; fish; grains; seeds; planting roots and bulbs; living plants; cuttings; scions and cut flowers and branches; animal feed; silage acids; scatterings for animals; fertilisers; pesticides; mulch; medication; books, newspapers and magazines, including in electronic format; non-commercial services of radio and television companies, certain supplies in connection with agricultural production. The 2.5% rate also applies to certain cultural services supplied directly to the public, considerations demanded for sporting events, cultural services and the supply of works by their creators when the suppliers have opted for taxation (otherwise those supplies are exempt without right of deduction). 3.7%; accommodation services.
Türkiye	0%: supply of ships, aircraft, and rail transportation vehicles; supply of services related to the manufacturing, repairing, maintenance of such vehicles; supply of services to ships and aircraft at harbours or airports; supply of goods and services for the exploration, management and refining of gold, silver, platinum, and oil; supply of machinery and equipment to persons who have an investment incentive document; goods and construction works for the construction, restoration and enlargement of seaports and airports; some goods and services related to national security; international roaming services supplied in Türkiye according to the reciprocity principle; supply of goods that are listed in the second list of excise duty tax law to the Presidency central organisation; the first supply of product certificate that are drawn up according to agricultural product license warehousing law via commodity exchange market; exemption for delivery of equipment produced for the disabled; deliveries and services made to Türkiye Red Crescent Society; fertilizer and feed deliveries; resident or workplace deliveries to non-residents in Türkiye; deliveries of goods and services made in the scope of construction of organized industrial zones and small industrial sites; deliveries and services made to donators in the scope of facilities that are donated to general and special budget public administrations, special provincial administrations, municipalities and villages by these donators; health services provided to foreigners; new machinery and equipment deliveries to those that perform R & D, innovation and design activities; printed books and periodicals. 1%: Basic food, some agricultural products; second-hand cars; funeral services; the part of the residences up to 150 square meters (for the residences which are built in risky areas and within the scope of transformation projects for risky buildings); lease of specified machinery and equipment; seeds. 8%: books; blood and blood component; cinema; theatre; opera and ballet tickets; private educational service; vaccines; some medical products and services; ambulance services; medicine; medical equipment; textile and confection products and custom manufacturing of them; accommodation services; meal services(excluding alcoholic beverages); services provided by orphanage and nursing homes; some constructional and agricultural machines; some furniture; clothing; stationery goods; waste water services; the part of the residences up to 150 square meters; plot and land deliveries; electricity delivery to residences and agricultural irrigation subscribers; basic cleaning and hygiene products.
United Kingdom	0%: food; certain services and goods supplied to charities; children's clothing; passenger transport; books; newspapers; certain electronic publications and e-books; domestic sewage and water; prescribed drugs; medicine; certain aids and services for disabled people; new housing, including the construction of new houses; residential and some charitable buildings. 5%: fuel and power for domestic and charity use; certain energy saving materials supplied together with fitting services to recipient of benefits; certain grant-funded installations of heating equipment; children car seats; smoking cessation products.

Notes:

* See country note.

VAT rates changes introduced after 1 January 2022 and temporary VAT rate reductions are mentioned in the country notes to this table

1. For the purpose of this table, reduced rates also include “domestic zero rates” (0%), i.e. instances where VAT is not charged by the supplier on domestic supplies while related input VAT is deductible. In some countries, these supplies are called “exempt with right of deduction” and in others “GST free”. They do not include zero-rate applied to exports, supplies of goods or services used or consumed abroad or other supplies subject to similar treatment such as international transport or supplies to embassies, international organisations and diplomatic missions, duty free shops etc. The scope of temporary reduced VAT rates applicable e.g. in the context of the Covid 19 crisis or the energy crisis are not mentioned in the table itself; they are rather described in the country notes to this Table. Regional rates are not shown in this table.

Source: National delegates. Data as of 1 January 2022.

Annex Box 2.A.2. Country notes to Annex Table 2.A.2. Application of reduced VAT rates

Austria*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 30 January 2020 until 30 June 2022.

Belgium*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies from 13 March 2020 until 30 June 2022 to imports of certain goods needed to combat the Covid-19 pandemic. A rate of 0% also applies to Covid-19 vaccines and in vitro diagnostic medical devices (and services closely linked to those) from 1 January 2021 to 31 December 2022. A rate of 6% applies to the supply, intra-Community acquisition and importation of masks and hydro alcoholic gels from 4 May 2020 until 30 June 2022. A rate of 6% applies to restaurant and catering services, excluding alcoholic beverages from 8 June 2020 until 31 December 2020. Temporary reduced rate(s) to counter rising energy costs: the VAT rate is reduced to from 21% to 6% on the supply of electricity for residential consumption from 1 March 2022 to 30 September 2022. The VAT rate is reduced from 21% to 6% on the supply of gas and district heating for residential consumption from 1 April 2022 to 30 September 2022. The VAT rate is reduced from 21% to 6% on the delivery with placement of solar panels, solar water heaters and heat pumps in recent homes (under strict conditions) from 1 April 2022 to 31 December 2023.

Canada. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to supplies of certain face masks (medical and non-medical) and face shields design for human use that meet certain specifications made after 6 December 2020 and until their use is no longer broadly recommended by public health officials for the COVID-19 pandemic. Relief of customs duties and GST for goods imported on an emergency basis by or on behalf of certain entities, including health authorities, from 16 March 2020 to 7 May 2022.

Colombia. The Colombian VAT legislation distinguishes three categories of goods and services: (i) “taxable goods and services” (subject to VAT); (ii) “exempt goods and services” (zero-rated with the right in some cases to credit VAT paid on inputs); and (iii) “excluded goods and services” (not subject to VAT nor with the right to credit VAT paid on inputs). Temporary reduced rates related to the Covid-19 pandemic: “VAT holidays” (i.e. days where B2C supplies of goods in a specific list of products is subject to a VAT rate of 0%) took place on 19 June, 3 July, and 19 July 2020, 28 October, 19 November and 3 December 2021; and on 11 March, 17 June and 2 December 2022. The leases of commercial property were subject to a VAT rate of 0% from 1 June until 31 July 2020. The VAT rate for airline tickets and related services was reduced from 19% to 5% from 15 April 2020 until 31 December 2021. This measure was extended until 31 December 2022. The provision of hotel and tourism services were excluded from VAT from 4 June until 31 December 2020. Afterwards, these services subject to a VAT rate of 0%, from 1 January 2021 to 31 December 2022. Restaurants operating as franchises were excluded from VAT from 4 June 2020 until 31 December 2021.

Costa Rica. Engineering, architecture, topography, and civil works construction services are exempt from VAT are subject to the reduced rate of 4% from 1 September 2021 to 31 August 2022; to the reduced rate of 8% from 1 September 2022 to 31 August 2023 and to the standard rate of 13% from 1 September 2023 onwards. Temporary reduced rates related to the Covid-19 pandemic: tourism-related services were subject to a VAT rate of 0% from 1 August 2020 to 31 July 2021; to the rate of 4% until 30 June 2022 and to 8% until 30 June 2023. Standard rate of 13% will apply from 1 July 2023 onwards.

Czech Republic*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 from 1 January until 30 June 2022 and to diagnostic medical devices for testing for the disease COVID-19 and vaccines against this disease until 31 December 2022.

Denmark*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022.

Estonia*. From 1 August 2022, a rate of 5% instead of 9% applies to newspapers and periodicals (both physical and electronic). Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022.

Finland*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applied to certain goods needed to combat the Covid-19 from 30 January 2020 until 30 June 2022. A temporary zero rate applies to Covid-19 self-test kits during 2022. Temporary zero rate applies to goods and associated services intended to be donated to Ukrainian refugees from 24 February until 31 December 2022.”

France*. Rates of 0.9%; 2.1%; 10.0%; 13.0% and 20.0% apply in Corsica; rates of 1.05%; 1.75%; 2.1% and 8.5% apply to overseas departments (DOM) excluding French Guyana and Mayotte. Temporary reduced rates related to the Covid-19 pandemic: rates of 0% or 5.5% apply to imports of certain goods needed to combat the Covid-19 from 1 January until 30 June 2022. A rate of 5.5 % also applies to supplies of certain goods needed to combat the Covid-19 from 1 march 2020 until 31 December 2022.

Germany*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to donations of certain medical material and equipment to hospitals from 1 March 2020 to 31 July 2020. A rate of 0% applies to imports of goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022. Restaurant and catering services (except beverages) were subject to the reduced rate of 5% from 1 July 2020 until 31 December 2020 and 7% from 1 January 2021 until 30 June 2021.

Greece*. Specific regional rates of 4.0%, 9.0% and 17.0% apply on the islands of Leros, Lesbos, Kos, Samos and Chios; the Decision to reduce the rates is automatically revoked within 3 months from the closure of Reception and Identification Centres and Temporary Reception/Hosting Structures and Closed Controlled Structures for refugees. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January 2020 until 31 December 2022. A rate of 0% also applies to the supply of COVID-19 vaccines and in vitro diagnostic medical devices and services closely linked to them. Sanitary products essential for the protection of public health during the COVID-19 pandemic (masks, gloves, etc.) are subject to the reduced rate of 6% from 20 March 2020 until 31 December 2022. Between 1 June 2020 and 31 December 2022, the reduced rate of 13% applies to admission to cinemas; transport of passengers and their accompanying luggage. In the same period, the reduced rate of 13% applies to services provided by restaurants, coffee shops and similar businesses, excluding nightclubs, and with the exception of the disposal of alcoholic beverages. In the same period, the reduced rate 13% applies to the supply of non-alcoholic beverages. The reduced rate of 13% also applies to sports tickets from 1 September 2020 until 30 June 2022. A reduced rate of 13% also applies to zoo tickets with effect from 5 February 2021 until 31 December 2022 and to services provided by gyms and dance schools (as soon as those are not exempt) from 1 October 2021 until 31 December 2022.

Hungary*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022.

Ireland*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022. From 12 December 2020 until 31 December 2022, a rate of 0% applies to the supply of authorised Covid-19 vaccines, services closely linked to those vaccines and to the supply of certain Covid-19 in vitro diagnostic medical devices and services closely linked to those devices. Temporary VAT rate reduction for Tourism and Hospitality sector from 13.5% to 9%, from 1 November 2020 to 28 February 2023. Temporary VAT rate reduction on energy products and supplies from 13.5% to 9%, from 1 May 2022 to 31 October 2022.

Israel. The rate of 0% applies when an Eilat resident dealer buys goods from Eilat non-residents. Supplies made by an Eilat resident supplier (to be consumed in Eilat) are exempt from VAT.

Italy*. Temporary reduced rates related to the Covid-19 pandemic: until 31 December 2022, a rate of 0% applies to the supply of COVID-19 vaccines and in vitro diagnostic medical devices and services closely linked to them. Temporary reduced rate(s) to counter rising energy costs: The VAT rate on the supply of natural gas for “civil and industrial uses” was reduced from 22% to 5% from 1 October 2021. In addition, the VAT rate on natural gas for transport use was reduced from 22% to 5% during the period from 3 May 2022 until 20 September 2022.

Latvia*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 31 December 2022. A rate of 0% also applies to Covid-19 vaccines and in vitro diagnostic medical devices (and services closely linked to those) from 20 December 2020 to 31 December 2022.

Lithuania*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January 2020 until 31 December 2021. From 1 January 2021 until 31 December 2022, a 0% VAT rate is applied to: supplies of vaccines against coronavirus infection; the supply of in vitro diagnostic medical devices for the diagnosis of coronavirus infection. A reduced rate of 9% applied to restaurants services, events and performance services provided by performers from 1 July 2021 to 31 December 2022.

Luxembourg*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022.

Netherlands*. Temporary reduced rates related to the Covid-19 pandemic: a rate of (effectively) 0% applied to the hiring of healthcare workers by healthcare facilities or institutions qualifying for the VAT exemption of medical services. The measure applied from 16 March 2020 to 1 October 2021. The rate of (effectively) 0% also applied to donations of Covid-19 related medical material and equipment to healthcare facilities or institutions and to general practitioners from 16 March 2020 to 1 January 2021. A rate of 0% applied to imports of certain goods needed to combat the Covid-19 pandemic from 30 January 2020 to 30 June 2022. A rate of 0% applied to the purchase in the Netherlands of mouth masks (medical and non-medical) from 25 May 2020 to 1 October 2021; a rate of 0% also applied to the supply of anti Covid-19 vaccines approved by the authorities and on the actual testing therewith as well as on the supply of Covid-19 self-test kits from 21 December 2020 until 1 October 2021; a rate of 0% applied to the supply of test kits with a CE-number (as listed by the European Commission) and the actual testing therewith from 16 April 2021 until 1 October 2021. A reduced rate of 9% on online sporting lessons by gyms/sporting schools applied from 28 November 2021 to 15 January 2022; reduced rate of 9% on individual online sporting lessons applied from 18 December 2020 until 19 May 2021 (online group lessons: until 4 June 2021).Temporary reduced rate(s) to counter rising energy costs: the reduced rate of 9% (from 21%) applies to natural gas, electricity, and district heating from 1 July 2022 to 31 December 2022.

Poland*. Temporary reduced rates related to the Covid-19 pandemic. 0% VAT rate has been temporarily introduced for the supply of vaccines being pharmaceutical products and tests for SARS-CoV-2 and the COVID-19 being in vitro diagnostic medical devices, meeting the conditions specified in the regulation. The measure applies (under certain conditions) from 23 December 2020 until 31 December 2022. Temporary reduced rates rate(s) to counter rising energy costs and inflation. As of 1 February until 31 December 2022: 0% for natural gas (8% in January 2022); 5% for district heating (8% in January 2022) and electricity (5% as of 1 January 2022); 8% for some motor fuels. From 1 February to 31 December 2022 the VAT rate has been lowered to 0% for foodstuffs subject to 5% VAT rate and for soil improvers, plant bio stimulants, growing media in the meaning of The Act on fertilisers and fertilising (excluding mineral growing media), fertilisers, plant protection products normally intended for use in agriculture. Until 16 May 2022 the 0% rate was applied for the donation of laptops, tablets, central processing units, servers, monitors, desktop computer sets, printers, scanners, computer equipment for writing Braille, digital data transfer equipment (including concentrators and net switches, routers and modems), made by VAT payers to educational institutions or educational, charitable or humanitarian organisations which transferred them free of charge to educational institutions

Portugal*. In the Islands of Azores, the standard VAT rate is 16% and the reduced rates are 4% and 9%. In the Islands of Madeira the standard rate is 22% and reduced rates are 5% and 12%. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to donations of certain medical material and equipment to hospitals from 1 March 2020. A rate of 0% applies to supplies, intra-community acquisition and imports of certain goods needed to combat the Covid-19 pandemic acquired by the State and other public entities, the national health service, private hospitals contracted by the State to fight COVID-19 and NGOs, from 30 January 2020 until 30 June 2022. A rate of 6% applies to imports, supplies and intra-community acquisitions of protective masks and disinfectant gel, from 8 May 2020 until 31 December 2022.

Slovak Republic*. Temporary reduced rates related to the Covid-19 pandemic: a temporary rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 30 January 2020 until 31 December 2021. A temporary rate of 0% applied from February to April 2021 to supplies (and intra-community acquisitions and imports) of personal protective equipment for respiratory protection (FFP2 and FFP3 respirators).

Slovenia*. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat Covid 19 from 30 January 2020 until 30 June 2022. The same applies to supplies and Intra-Community acquisition of these goods from 13 March 2020 until 31 July 2020 and from 1 November 2020 until 30 June 2022. Temporary reduced rate to counter rising energy costs: the VAT rate is reduced from 22 % to 9.5 % on electricity, natural gas and district heating from 1 September 2022 until 31 May 2023.

Spain*. Rates of 0.0%, 3.0%, 5.0%; 7.0%, 9.50%; 15.0%, 20% apply in the Canary Islands. Rates of 0.5%, 1.0%, 2.0%, 3.0%; 4.0%, 5.0%; 6.0%, 8.0%, 9.0% and 10% apply in either Ceuta or Melilla. Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to the supply of medical equipment from national producers to public entities, NGOs and hospitals until 31 October 2020. A rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January until 30 June 2022. Temporary reduced rate(s) to counter rising energy costs: the VAT rate was reduced from 21% to 10% on energy bills from 1 December 2021 until 30 June 2022.

Sweden*. From 1 July 2022 the reduced rate 6 % applies on repair of bikes, shoes, leather goods and household linen (instead of the reduced rate 12%). Temporary reduced rates related to the Covid-19 pandemic: a rate of 0% applies to imports of certain goods needed to combat the Covid-19 pandemic from 1 January 2020 until 30 June 2022.

Türkiye. Temporary reduced rates related to the Covid-19 pandemic: a rate of 1% applies to the supply of domestic air transport from 1 April to 30 June 2020. A rate of 8% applies to the supply of tradesman services such as small home appliance maintenance and repairing; house maintenance, paint and cleaning; car washing; barbering; hairdressing; locksmithing; tailoring; shoe repairing and painting; dry cleaning; carpet washing; etc. from 31/7/2020 to 30/9/2021. A rate of 8% applies to the supply of workplace rental, passenger transportation, wedding organization services, entrance fees (congress, conference, seminar, concert, fair and amusement park), etc. from 31/7/2020 to 30/9/2021. A rate of 1% applies to the supply of entrance fees (cinema, theatre, opera, operetta, ballet, museum), accommodation and catering services from 31/7/2020 to 30/9/2021. A rate of 1% applies to the supply of education and training services from 31/7/2020 to 30/9/2021. A rate of 1% applies to the supply of Covid-19 vaccines from 23/12/2020 to 31/12/2022. A temporary rate of 0% applies to supplies of substances to be used in the production of goods to be exported under the inward processing and temporary admission regime until 31 December 2025; to the delivery of goods and provision of services to international organizations operating in Türkiye within the framework of host state agreements or other agreements to which it is a party, to construction works for investments with a minimum fixed investment amount of 500 million Turkish Liras within the scope of investment incentive certificates, to delivery of goods and services related to construction works within the scope of the certificate to taxpayers holding investment incentive certificates for the manufacturing industry and tourism until 31 December 2025, to deliveries of new machinery and equipment to be used exclusively in the manufacturing industry to value-added taxpayers carrying industry registration certificate until 31 December 2022, to engineering services provided to taxpayers who manufacture electric motor vehicles in Türkiye as a result of their R&D activities in Türkiye to develop technologies that will eliminate greenhouse gas emissions until 31 December 2022.

United Kingdom: Temporary reduced rates related to the Covid-19 pandemic: a rate of 12.5% applies to the supply of hospitality, holiday accommodation and attractions from 1 October 2021 to 31 March 2022.

* European Union. According to the European Commission Decision (EU) 2021/2313 on 22 December 2021, the exemption from import duties and VAT on the imports of goods intended for distribution free of charge by the relevant bodies and organisations to the persons affected by or at risk from COVID-19 or involved in combating the COVID-19 outbreak was extended from 1 January 2022 to 30 June 2022 for 23 EU Member States, at their request. This Decision is further extended until end 2022 for 5 EU Member States. Are also exempt from VAT the imports of goods and purchases of goods and services made by the European Commission or a European institution, in execution of tasks they have been entrusted with in the objective of fighting the Covid pandemic-19.

On 5 April 2022, the EU Council adopted a change in the EU VAT Directive providing Member States more freedom regarding the use of reduced VAT rates, including the use of domestic zero rates for essential products such as food, pharmaceuticals and products for medical use. Most country-specific rates (i.e., derogations) will become available to all Member States. On the other hand, environmentally harmful goods such as fossil fuels and chemical fertilisers/pesticides will be excluded from the reduced rates as of 1 January 2030 and 1 January 2032, respectively. As of 1 July 2022, a zero rate will also apply to supplies made for the benefit of the armed forces of the Member States when they are assigned "to a defence effort carried out with a view to implementing an activity of the Union within the framework of the common security and defence policy” similar to what is already applicable for NATO armed forces.

Annex Table 2.A.3. VAT Exemptions

Country	Exemptions	Taxation of “common exemptions” in the country
Australia	Certain financial services; life insurance; residential rent and residential premises (other than new residential premises or commercial residential premises); certain supplies of precious metals; school canteens operated by non-profit bodies (optional); certain fund raising events conducted by charitable institutions.	Domestic postal services; sporting services; cultural services excluding religious services (zero rate); insurance and reinsurance excluding health insurance (zero rate); gambling (including lottery tickets and betting); supplies of land and buildings (except certain supplies of farm land and supplies of going concerns– zero rate and existing residential premises – exempt).
Austria	Common exemptions2	Letting (private housing)
Belgium	Common exemptions2	-
Canada	Common exemptions2; legal aid; public transit; ferry, road and bridge tolls; child and personal care services; certain regulatory/administrative supplies by a government or a municipality.	Most betting, lotteries and gambling; supply and leasing of commercial land and buildings; sales of newly constructed or substantially renovated housing; domestic postal services; most cultural and sporting services e.g. adult programmes; services provided by other than public sector bodies; most admissions to a place of amusement (e.g. museums, films, professional performances and sporting events, etc.); human blood and certain biologicals (zero rate).
Chile	Until 31 December 2022, services not specifically listed in the law are out of scope of VAT (e.g. legal, accounting, engineering, architecture and other professional services). As from 1 of January 2023, all services will be subject to VAT. Exemptions apply to: used motor vehicles; goods provided by the employer to dependent employees; domestic raw materials used in the production, processing or manufacture of goods for export; some imports by the Ministry of Defense, the Army and other related organisms; some imports by the firefighting organisations (Cuerpos de Bomberos) and the Junta Nacional de Cuerpos de Bomberos; some imports by the Chilean Mint (Casa de Moneda de Chile S.A.) and other persons provided that the import is made in the context of operations with the Central Bank of Chile; capital goods imported and assigned to projects involving investments of USD 5 000 000 or more; income received from tickets to shows and meetings; international freight, passenger transport including the transport of passenger within the national territory; premiums and disbursements of reinsurance contracts; commissions earned by the Regional and Metropolitan Housing and Urbanisation Services and Social Security Institutions on mortgages; non-taxable income; income subject to additional income tax; income such as wages, salaries, pensions, income obtained by independent workers and directors fees if taxed with income tax; insertions and notices to be published and disseminated under the right of reply; certain insurance premiums; financial interests; commissions coming from guarantees issued by financial institutions; letting and lease with a purchase option of immovable property; remunerations linked to exports; income obtained from services rendered to persons domiciled or resident abroad and qualified as exportable services by Customs; income of hotels relating to services rendered to foreign tourists and income from letting of furnished immovable properties rented to foreign tourists; fees paid for managing retirement savings earned by specific authorized institutions; income obtained by independent professionals, where the physical effort is more relevant than the capital or materials used; construction contracts and finance lease of a house financed with a housing subsidy granted by the Ministry of Housing and Urban Development; broadcasting and television enterprises excluding income from advertisement; news agencies; educational services; health services; health contributions paid to Private Health Insurance Companies; manufacturing of currency by Casa de Moneda de Chile; postal services rendered by Servicio de Correos y Telégrafos de Chile; interests, premiums, commissions or other forms of remunerations paid by authorized lotteries (Polla Chilena de Beneficencia and Lotería de Concepción to individual) or legal entities for business services; other minor exemptions. As from 1 January 2023, specific exemptions will apply in regard to certain professional and medical services.	Income from artistic shows or plays not sponsored by the Ministry of Culture, Arts and Heritage; income from certain circus and sports events if certain requirements are not met. Postal services are subject to VAT if they are not provided by “Correos de Chile” (Chilean postal service company). Payments to be done when using a private health insurance if these payments exceed amount normally covered by the public health insurance. Educational services are exempted as long as they cover teaching activities only. Letting of immovable properties is exempted to the extent that the immovable property is not furnished and there is no commercial or industrial equipment to carry out any commercial or industrial activity.
Colombia	Common exemptions2.; public transport; contraceptives; certain agricultural products and inputs; live animals; salt; natural or artificial mineral water; public utility services (electricity, water and gas); leasing of real estate for housing; tickets for movies,; funeral services; mineral or chemical fertilizers; real estate; computers (that cost less than COP 1 900 200), bicycles and scooters (that cost less than COP 1 815 400), smartphones (that cost less than COP 836 088); clothes, hygiene products, construction materials, medicine (for humans and animals), jet fuel destined exclusively to the departments of Guainía, Guaviare, Vaupés and Vichada; oil payed in kind as royalties; scientific books and magazines; restaurants, bakeries and catering.	Postal services from countries where Free Trade Agreements are not concluded, lotteries and gambling (except the ones that exclusively operated online).
Costa Rica	Financial services and related: interest and commissions derived from all loans and credits; credits for invoice discounting, financial and operating leases in financial function; financial services between regulated entities, such as services for the collection of deposits from the public, cash withdrawals, services for the payment of public services and taxes, purchase, sale or exchange of foreign currency and credit and debit card commissions; guarantees and participation and performance guarantees provided by banks; commissions paid to pension operators; survivors' insurance premiums with annuities and annuities of other types; leases of real estate for housing and household goods, when the amount of the monthly rent is equal to or less than 1.5% base salary (base salary is CRC 693 300.00, approximately USD 1 015.00; it is updated yearly according to inflation) (if higher, VAT is applied to the total); leasing for religious organizations of the places in which they carry out their worship; leases by micro and small businesses registered as such Water and power supply: residential electricity supply, when the monthly consumption is equal to or less than 280 kW/h (if higher, VAT is applied to the total amount consumed); residential water supply, when the monthly consumption is equal to or less than 30 cubic meters (if higher, VAT is applied to the total consumed); self-consumption of electricity generated by solar panels and other renewable sources, such as wind, sun and biomass; purchase of electricity for distribution. Health and social protection: Sale or import of wheelchairs, orthopedic equipment, prostheses, equipment used by people with hearing problems, equipment for rehabilitation and special education programmers; goods and services sold, provided or acquired by the Costa Rican Red Cross, as long as they are necessary for the fulfilment of its functions; goods and services provided or acquired by the Fire Department; acquisition of goods and services by the Children Hospital Association and the National Crusade Federation for the Protection of the Elderly; procurement of goods and services by the Agriculture School of the Humid Tropical Region (EARTH), the Central American Institute of Business Administration (INCAE), community development associations, education and administrative boards of public educational institutions, and associations that administer communal aqueducts and sewers; premiums for occupational, agricultural and social housing risks; national lotteries, raffles, games and other products of chance run by the Social Protection Board; care networks and care centers for the elderly. Transportation: authorized passenger land transport services and passenger cabotage services. The importation of transport units used for the provision of these services is also exempt. Cultural and education: tuition fees and credits for courses offered in public universities; books regardless of their format (this exemption does not apply to electronic media that allow access to and reading of books on media other than paper); services provided by cultural radio stations; private education services, pre-school, primary, primary, secondary, university, para-university and technical, subject to inspection by the Ministry of Public Education. Agricultural: commissions for the service of livestock and agricultural auctions and live animal transactions carried out at authorized auctions. Others: Use of advertising exclusively for their own purposes by television and radio stations; membership fees and monthly fees paid to professional associations, trade unions and chambers of commerce; self-consumption of goods or services, provided that no input tax deduction was granted on their procurement.
Czech Republic	Common exemptions2; public television and radio.	Certain cultural services (e.g. admission to theatres, cinemas, concerts, etc. subject to reduced rates); sporting services provided by others than by non-profit making organisations; supply of construction land; supply of new building and building land (subject for the option to taxation).
Denmark	Hospital and medical care; dental care; social service; education; non-commercial activities of some non-profit making organisations; non-profit sport activities etc.; cultural services (some exceptions); literary and composing activities; creative artist; letting of immovable property; supply of immovable property; insurance and reinsurance; financial services; lotteries and gambling; postal service; stamps; transport of persons; funeral service; certain fund-raising events; charitable work	Cultural services as radio, television broadcasting, cinema, theatre, concerts etc.; short term letting of immovable property; option to tax commercial letting; supply of new building and building land; some commercial postal service
Estonia	Common exemptions2	Immovable property, except dwellings (optional); financial services (optional); cultural services
Finland	Common exemptions2; services of performers; copyright to literary and artistic works (excluding payments to or from an organisation representing the copyright holders); certain transactions by blind people; public cemetery services; self-picked natural berries.	Cultural services; letting of commercial buildings in certain cases (optional)
France	Common exemptions2; construction, improvement, repair and maintenance work on monuments, cemeteries and graves commemorating war victims undertaken for public authorities and non-profit bodies; commodity futures transactions carried out on a regulated market; services rendered by resource consortia to their members composed of natural or legal persons that are VAT exempt or not subject to VAT.	Letting of immovable property (full taxation for letting of developed immovable property and land for professional use; option to tax for letting of undeveloped immovable property for professional use in certain circumstances and letting of land and buildings for agricultural use); transport services for sick/injured persons in vehicles not specially equipped for this purpose and/or carried out by persons who do not have administrative certification; recreational and sporting services; cinemas, concerts and theatres.
Germany	Common exemptions2
Greece	Common exemptions2; national radio and TV broadcasting activities other than those of commercial nature; remunerative contributions imposed by Organizations of Territorial Improvements to their members for the supply of irrigating water and relative supplies directly connected thereto; services provided by dental technicians and the supply of dental prosthetics by dentists and dental technicians; supply of breast milk; supply of goods of an enterprise, in whole or in part, to an existing legal person or one being set up against a consideration, or as a gift or as contribution, provided that the goods were used until then exclusively in an exempt from (or out of scope of) VAT activity (or supply of goods to special scheme farmers) and the supplier was not granted or exercised input tax deduction; disposal of staff by religious or philosophical institutions for hospital, social and educational activities, with a view to spiritual welfare.	Postal services not rendered by the Greek Post Office (ELTA.); charitable work when provided by organisations without state recognition; hospital and medical care supplied by profit organisations or by non-profit private organisations under distortion of competition; sporting, cultural, religion related or philosophy related etc. services supplied by profit organisations or subject to distortion of competition; supply of new buildings; letting of immovable property for professional use (optional taxation).
Hungary	Common exemptions2; public radio and TV broadcasting (except for commercial activities).	Supply of building land, of new buildings (taxation of further supplies and letting of immovable property is optional); certain cultural services (e.g. admission to theatres, cinemas, concerts), certain sporting services (e.g. swimming pool services, entrance tickets to sporting events).
Iceland	Common exemptions²; sports, admission fees to athletic events and health facilities; public transportation, organised transportation of disabled, elderlies and school children, taxi services; authors, composers, burials and church-related services; medical and social services; cultural services; operation of schools and educational institutions; rental of real properties and parking spaces; lotteries and betting pools, charities.
Ireland	Common exemptions² ; passenger transport; national broadcasting; supply of water by public authorities; admissions to sporting events; funeral undertaking; certain catering services supplied to hospitals, nursing homes or schools; supply of investment gold; Importation of gas, electricity and heat or cooling energy.	Letting of commercial immovable property (subject to the option for taxation by the landlord); supply of undeveloped land and buildings that are not new (subject to a joint option for taxation); recreational and sporting services.
Israel	Rentals for residential purposes for a period of not more than 25 years; the sale of a part of a building which was approved as a rental building; transactions of an exempt dealer, other than transactions that are sales of real estate; the sale of an asset, on which input tax in respect of its acquisition or importation could not be deducted lawfully at the time of its acquisition or importation; deposits in a financial institution or giving a loan to a financial institution; goods whose import is tax exempt in certain cases; supplies made by an Eilat resident supplier(to be consumed in Eilat); the sale of residential dwelling to Real Estate Investment Trust (REIT) by a person who is not a dealer and the sale of that dwelling by the REIT.	Non-commercial activities of non-profit making organisations; financial services (specific regime).
Italy	Common exemptions²; taxi; funeral services.	Supply and letting of land; supplies of buildings are taxed in the first five years when sold by building enterprises within five years from their construction or after five years if the latter has opted for non-exemption. This scheme applies in the case of commercial buildings, while for residential housing taxation only applies when let by building enterprises which have opted for non-exemption. Rates are 4% for non-luxury owner-occupied dwelling, 10% for other non-luxury houses and 22% for luxury housing. Certain social assistance services provided by public bodies and non-profit organisations; welfare services to employees.
Japan	Common exemptions²; social welfare services; sale of certain kinds of equipment for the disabled people; administrative services; alienation of securities, textbooks, tuition fees.	Postal services; supply of buildings; cultural and sporting services provided by others than non-profit organisations; letting of immovable property by business.
Korea	Common exemptions2; certain public transport; supply of water and certain coal; mineral oil used for certain purposes in agriculture and fishery; funeral undertaking; certain personal services similar to labour; books, newspapers and magazines; broadcasting; farm, marine and forest products.	Rental and supply of commercial buildings; commercial cultural services; gambling in licensed clubs.
Latvia	Common exemptions²; royalty received by the author.	Supply of used immovable property (only a registered taxable person has the right to apply tax on the supply thereof), letting of commercial buildings.
Lithuania	Common exemptions²; public television and radio, sale of postal and fiscal stamps, social welfare services and goods related to it, services supplied to members.	Supply of building land and new (24 months) buildings, short-term (up to 2 months) letting of residential premises, letting of parking spaces and similar, supply of land and used buildings when option to tax is exercised.
Luxembourg	Common exemptions².	-
Mexico	Common exemptions²; gold and silver coins; shares; foreign currency; retailing of gold bullion with a content of at least 99 % gold; authors’ rights; urban, suburban and metropolitan public transport of passengers by land including by train (with the exception of public transport that is contracted through digital intermediation service platforms and the vehicles with which the service is provided for private use); sale of used movable property (with exception of those sold by companies); professional medical services.	Postal services; insurance services (except life and agricultural insurance); transport of sick/injured persons; public hospital and medical care, sports services; financial services for consumer and personal credits; certain kinds of public spectacles like movie tickets; supplies of land and buildings (except housing); certain fund raising events and sale of goods, provision of services and granting of the temporary use or enjoyment of goods carried out by non-profit institutions authorized for receive deductible donations for effects the CIT.
Netherlands	Common exemptions²; burials; cremations; public broadcasting; sports clubs; the services of composers, writers and journalists.	Cultural services (mostly lower rate); letting of immovable property other than houses (only at combined request by letter and hirer); supply of immovable property (only at the combined request of supplier and purchaser); the use of sports accommodation; recreational and sporting services; admission to cinemas, concerts and theatres; sporting events; museums and zoological gardens.
New Zealand	Financial services; supply of residential accommodation in a dwelling; fine metal; supply by a non-profit body of donated goods and services.	Postal services; human blood, tissues and organs; hospital and medical care; transport of sick/injured persons; dental care; charitable work; certain fund raising events; education; non-commercial activities of non-profit making organisations (other than unconditional gifts); cultural services; sporting services; insurance and reinsurance (other than life insurance and reinsurance); letting of immovable property (other than residential accommodation); betting, lotteries and gambling; supply of land and buildings (other than land and buildings which have been used for the provision of residential accommodation for five years or more).
Norway	Common exemptions²; burials; stamps and coins for collection purposes; management services by a housing association to an affiliated housing cooperative; services in the form of membership of a board, supervisory board, committee, council or similar if the consideration is included in the employer’s National Insurance contributions; services in the form of offsetting emission allowances	Postal services; infrastructural services within the passenger transport sector; admission to sporting events, museums, cinemas and amusement parks; letting of commercial buildings (optional).
Poland	Common exemptions2; public radio and television.	Rental or tenancy of the dwelling buildings used for commercial purposes; supply of building land or land for development and supply of some buildings.
Portugal	Common exemptions², burials and cremations, copyright to the literature and works of art.	Option to tax the supply and letting of immovable property; option to tax training services
Slovak Republic	Common exemptions²; public television and radio; services supplied to members; sale of postal and fiscal stamps.	Supply of a construction, including the supply of building land, on which the structure is constructed, provided that the supply is made within five years after the first approval of the building or a part thereof based on which the building or a part thereof was approved for use or within five years from the day when the building or a part thereof was put in use for the first time; option to tax supply and letting of immovable property; training, educational, sporting and cultural services provided by others than by non-profit making organisations.
Slovenia	Common exemptions²; public television and radio.	Supply of new buildings; admission to cultural and sporting events; educational, sporting and cultural services provided by profit making organisations; option to tax letting of immovable property.
Spain	Common exemptions²; copyright to literature and works of art; services provided by associations, entities, groups (including "economic interest groupings) and other legal persons to their members when they are exclusively integrated by taxable persons carrying out economic activities exempted or not subject to VAT; certain social assistance services provided by public bodies or not-for-profit organisations.	Cultural and sporting services provided for taxable persons different from public bodies and non-profit making organisations; letting of commercial buildings; building land; supply of new buildings.
Sweden	Common exemptions²; public television and radio; public cemetery services; social services; creative artists.	Most cultural services; letting of commercial buildings in certain cases (optional).
Switzerland	Common exemptions2; cultural services and the supply of cultural works by their creators, such as authors, composers, film makers, painters, sculptors and services supplied by publishers and collecting societies in order to circulate these works; the supply of used movable goods, which were used exclusively for the provision of supplies exempt from the tax without credit; the sale of agricultural, forestry and market garden products cultivated in their own business by farmers, foresters or gardeners, the sale of cattle by cattle dealers, and the sale of milk by milk collection points to milk processing plants; publicity services, which charitable organisations provide for the benefit of third parties or third parties for the benefit of charitable organisations; the exercise of arbitration functions; supplies between organisational units within the same public authority, between private or public law companies owned wholly by public authorities and the public authorities that own them or their organisational units, between institutions or foundations that were founded exclusively by public authorities and the public authorities that founded them or their organisational units; the provision of staff by public authorities to other public authorities; supplies between education and research institutions that are involved in education and research cooperation, provided those supplies are made as part of the cooperation, irrespective of whether the education and research cooperation is liable to value added tax.	The dispensing of artificial limbs and orthopedic equipment; renting of exhibition stands and individual rooms in exhibition and congress buildings.
Türkiye	Importation of goods for cultural and educational purposes or for social purposes; restoration project related to cultural object; delivery of goods and provision of services to military factories, shipyards and factory plants; exempted taxpayers according to Income Tax Law; mergers and transfer according to Corporate Income Tax Law; transactions on leasing of real properties not included in economic enterprises; banking and insurance transaction; transactions of the Mint House and the Stamp Printing House; supply of precious mine and waste; supply of water used in agriculture; services supplied in free trade area; transportation of foreign oil and gas by pipelines; supply of land and workplace for organised industrial zone; supply of goods within the scope of financial restructuring; the transactions of Savings Deposit Insurance Fund; news service provided to General Directorate of Press and Information; renting work place in customs area; delivery and leasing of immovable property by the Treasury ; transfers and deliveries resulting from the sales of shares and real properties that have been included for at least two years in the assets of institutions; transfer of movable and immovable assets and intangible assets to the asset leasing company and the leasing of assets by asset leasing company; services provided by “Insurance Arbitration Commission” about settling disputes; roaming services received from abroad in the scope of international roaming agreements and reflection of these services to customers in Türkiye; delivery and services for social content production and mobile application development earnings.	Private education; private cultural services and sporting services; private hospital and medical care and dental care; human blood; transport of sick/injured persons(lower rate); postal services; sale of commercial buildings; letting; radio and television broadcasting; betting, lotteries and gambling; financial services that are made by financial corporation; supply of land and buildings included in economic enterprises ; public education;; tissues and organs; certain charitable work that is made by public organisation or certificated institution; insurance and reinsurance; certain fund-raising events(non-taxable).
United Kingdom	Common exemptions2; burials and cremations; sports competitions; works of art.	Standard rated: freehold sales of new commercial buildings (standard rated for three years from completion date) and “option to tax” for other ordinarily exempted supplies of commercial buildings; gaming machines and certain gambling in licensed clubs Zero-rated: New housing, including construction of new houses; residential and some charity buildings.

Notes:

1. Exemptions: for the purposes of this table, “exemption” refers to supplies for which VAT is not levied on the amount charged by the supplier while the latter is not allowed to deduct related input tax. In some countries, such supplies are called “input-taxed supplies”.

2. Common exemptions: in this table, “common exemptions" refers to exemptions generally applied in most OECD countries, i.e. postal services; transport of sick/injured persons; hospital and medical care; human blood, tissues and organs; dental care; charitable work; education; non-commercial activities of non-profit making organisations; sporting services; cultural services (except radio and television broadcasting); insurance and reinsurance; letting of immovable property; financial services; betting, lotteries and gambling; supply of land and buildings; certain fund-raising events.

Source: National delegates; position as at 1 January 2022.

Annex Table 2.A.4. Restrictions to the right to deduct VAT on specific inputs

Country	Inputs on which the right to deduct VAT is denied or limited
Australia	Entertainment: recreational club leisure facility, entertainment, meal entertainment, family maintenance, relative's travel. Vehicles: the amount of GST recoverable on the acquisition of a car is limited to that applicable to the car depreciation limit for the income year, currently AUD 59 136. Others: penalties, non-compulsory uniforms. GST is not recoverable on the expenses above to the extent they are not eligible for a deduction under the income tax law.
Austria	Entertainment: all entertainment or lifestyle expenses. Vehicles: passenger vehicles, except used for at least 80% for commercial passenger transport or commercial leasing purposes, driving school vehicles.
Belgium	Entertainment: expenditure on accommodation and on food and drinks in cafés and restaurants (with a number of strict exceptions), liquor (with a number of strict exceptions) and reception costs. Vehicles: Deduction of input VAT is limited to 50% on expenditure relating to vehicles for the transport of persons and/or goods by road (with a number of strict exceptions such as lorries, ambulances, hearses, certain vans, scooters, motorcycles, camper vans, taxis, etc.). Others: supplies relating to special VAT scheme (e.g. margin scheme, tobacco products).
Canada	Entertainment: deduction restrictions apply to memberships in dining, recreational or sporting facilities clubs; deduction for food, beverages, and entertainment expenses generally limited to 50% of the GST/HST payable. Food and beverage expenses for long-haul truck drivers are limited to 80%. Vehicles: deduction is limited on passenger vehicles acquired as capital property to the GST/HST payable on the capital cost value (CAD 34 000); a higher deduction limit is available for zero emission passenger vehicles (CAD 59 000); deduction is limited on passenger vehicles leases to the GST/HST payable on CAD 900 monthly lease payments. Others: home office expenses restriction to the extent that the consumption or use of a property or service of such quality, nature, or cost is unreasonable given the person’s commercial activity.
Chile	Vehicles: automobiles, station wagons and similar vehicles as well their lubricants, spare parts, repairs or maintenance unless the regular business activity of the taxpayer is the sale, rental or lease of automobiles or unless the Commissioner of the Internal Revenue Service consider the relevant expenses as deductible for income tax purposes. Fuels: products or components that have any form of subsidy for end consumers.
Colombia	VAT levied on the acquisition of fixed assets that are not deemed as productive fixed assets is denied. Such VAT will be deemed as a higher value of the asset and will be taken into account for depreciation or amortization.
Costa Rica	The acquisition of the goods and services listed below and the accessories or complements of them shall not give entitlement to a tax credit, unless they are sold or leased by taxpayers who habitually engage in such transactions, or the amount thereof is treated as a tax-deductible cost or expense for income tax purposes: Entertainment: food, beverages and tobacco. Access to shows and services of a recreational character. Travel services, hotels and restaurant services. Vehicles: Vehicles whose number plate is not classified as special equipment, as well as the transfer of use of these by any title. In this case, right to deduction is limited to 50%. Others: Jewelry, gems, precious stones, natural or cultured pearls, and articles made wholly or partly of gold or platinum.
Czech Republic	Entertainment: representation expenditures as defined in the income tax law for which there is no tax allowance according to the income tax law (except small gifts).
Denmark	Entertainment: expenses of entertainment, restaurant and presents. Vehicles: supply of vans with a weight of 3000kg or less used for both taxable and non-taxable purpose; cars with room for less than 10 persons; leased cars. Others: employee telephones paid by employer; board of employees and owner of the company; other objects in favour of the employees.
Estonia	Entertainment: goods or services relating to the reception of guests or the provision of meals or accommodation for employees. This restriction does not apply to accommodation services received during a business trip. Vehicles: the right of deduction is limited to 50% on purchase, import, lease or hire of passenger cars not wholly used for business purposes and on the related expenditures, except for cars purchased for resale, hire or lease, for cars used for the transportation of passengers (e.g. taxis) and for cars used for driving lessons.
Finland	Entertainment: representation and entertainment expenses. Vehicles, boats and aircraft: used for sporting and leisure purposes, cars, motorcycles and caravans. However, any means of transport which are to be resold, rented out or used in professional passenger transport or in driving lessons as well as passenger cars used only for taxable transactions are deductible. Others: travelling costs of personnel between home and workplace; goods and services related to dwellings or buildings provided for the recreation of personnel.
France	Vehicles: vehicles or equipment, whatever their nature, designed to carry persons or mixed-use, except those for resale as new; leased, having in addition to the driver's seat more than eight seats used by companies to bring their staff on the workplace, assigned exclusively to the driving instruction, all type of road vehicles exclusively for the operation of ski lifts and ski areas, vehicles acquired by companies of public passenger transport and assigned exclusively to the realisation of such transport. Components, parts and accessories of vehicles and machines previously referred. Others: goods and services used by taxable persons for more than 90% for a non-business purpose; gifts above a certain value; goods or services linked to the free supply of housing to officers or employees of a company, except when it’s for the security staff on construction sites or in company premises; goods or services used for advertising alcoholic beverages; supply of passenger transport and services ancillary to such transport, except those produced either on behalf of an enterprise of public passenger transport, or under a permanent contract of transport by companies to bring their staff on the workplace; most fuels not subsequently delivered or sold as is or as other petroleum products. Partial restrictions: The right of deduction is limited to 50% for gas oil and other hydrocarbons in gaseous state and kerosene used as fuel, when such products are used for vehicles and equipment mentioned above. The right of deduction is limited to 80% for gas oils and bio ethanol E85 used as fuel for vehicles and equipment mentioned above, except those used for testing for the purposes of making engines of motorised equipment and insofar as they are not subsequently delivered or sold as is or as other petroleum products. The right of deduction is limited to 60% for petrol used as fuel for vehicles.
Germany	Entertainment: representation expenditures as defined in the income tax law for which there is no tax allowance according to the income tax law (e.g. gifts except small gifts, restaurant, catering, entertainment expenditure except appropriate ones, expenditures on hunting and fishing, sailing yacht or motor yachts and expenditures of similar nature).
Greece	Entertainment: receptions, recreation and hospitality in general; accommodation, food, drinks, transport and recreation for the personnel or representatives of the business. Means of transport: motor passenger vehicles of “private use” of up to 9 seats; motorcycles and mopeds, vessels and aircrafts of “private use” intended for recreation or sports, and the related supplies of fuel, repair, maintenance, rental/leasing and circulation in general. The restriction does not apply to the aforementioned means of transport when they are intended for sale, rental/leasing or transport of persons for a fare. Others: spirituous or alcoholic beverages intended to be used in non-taxable activities; manufactured tobacco products.
Hungary	Entertainment: services of restaurants and other public catering services; entertainment services; food and beverages. Vehicles: passenger cars (except hearses), motorcycles above 125 cubic centimetres; yachts and vessels. Others: supplies of motor fuels, other fuels, other goods used in connection with the operation or maintenance of passenger cars; residential properties, goods and services used for the construction or remodeling of residential properties; taxi services, parking services, highway toll services; 30% of input tax regarding fixed phone, mobile phone and VOIP service; 50% of input tax regarding the services used for the operation or maintenance of passenger cars.
Iceland	Entertainment: all expenses related to catering and food for the taxable person. Vehicles: supply, running and rental of passenger cars; delivery trucks, trucks and off-road vehicles with a weight of 5.000 kg or less, unless used for specially regulated taxable purpose. Others: all expenses related to residential property for the owner and the employees of the taxable person. All expenses which come instead of salaries to the owner and the employees of the taxable person. All expenses related to summer houses and similar entertainment for the owner and the employees of the taxable person; presents.
Ireland	Entertainment: food, drink, accommodation (except for qualifying conferences), personal services, entertainment. Vehicles: purchase or hire of passenger vehicles (up to 20% of the VAT cost is allowed where the car meets certain conditions regarding business use and emission levels). Others: petrol (unless part of stock in trade).
Israel	None
Italy	Entertainment: entertainment expenses, food and beverages. Vehicles: means of transport and services of transport (motor vehicles, aircraft and yachts) – for means of transport 60% of the input VAT is not deductible; passenger transport. Others: luxury goods and connected services, buildings.
Japan	None
Korea	Entertainment: entertainment expenses and similar expenditures. Vehicles: purchase and maintenance of non-business small automobiles.
Latvia	Entertainment: 60 % shall not be deductible from the tax as input tax from the tax amount to be paid into the State budget for the goods acquired and services received for the representation needs. Vehicles: 50 % shall not be deductible from the tax as input tax from the tax amount to be paid into the State budget for an acquired, leased or imported passenger car the number of seats of which, not including the driver’s seat, does not exceed eight seats, as well as the costs related to the maintenance of such car, including expenses for repair of the car and purchase of fuel. Fully non-deductible is the tax amount to be paid into the State budget for buying, renting and importing passenger car the number of seats of which, not including the driver’s seat, does not exceed eight seats and value higher than EUR 50 000 (exclusive of VAT), as well as the costs related to the maintenance of such car, including expenses for repair of the car and purchase of fuel.
Lithuania	Entertainment: representation and entertainment expenditures as defined in the income tax law for which there is no tax allowance according to the income tax law and 50 % expenditures of representation and entertainment as defined in the income tax law for which there is tax allowance according to the income tax law. Vehicles: passenger cars (up to 8 passengers excluding driver), except in cases where the cars are supplied, leased, used for taxi services or where the cars are classified as special purpose vehicles.
Luxembourg	Entertainment: not strictly business expenditures such as luxuries, entertainment or amusements.
Mexico	No specific restrictions list. The law establishes that deductions must come from goods and services that are “strictly indispensable” for the principal activity. The expenses deductible for VAT purposes must be deductible in terms of the Income Tax Law. The Income Tax Law has list of “Authorised deductions” for each type of regime.
Netherlands	Entertainment: restaurant services. Also certain representation and gift expenditures.
New Zealand	Entertainment: entertainment expenses are in effect only 50% deductible. Businesses may claim a full deduction when the goods and services are acquired and must annually calculate and repay the deemed 50% private portion.
Norway	Entertainment: catering and hiring of locations related to catering; entertainment expenses; the construction, maintenance, renting or operation of real property for accommodation or welfare needs. Vehicles: procurement, operation or maintenance of passenger vehicles. Others: works of art or antiques; accommodation of- and remuneration in kind to the owner, management, employees or pensioners of an enterprise; business gifts, goods and services for distribution for advertising purposes; cash payments above NOK 10 000 (USD 1040).
Poland	Entertainment: restaurant services and accommodation. Vehicles: limitation to 50% of the right to deduct VAT on the purchase, intra- Community acquisition, import, hire or lease of motor vehicles as well as VAT charged on expenditure related to those vehicles, where the vehicle is not entirely used for business purposes. Others: limitation to 50% of the right to deduct VAT on the purchase of motor fuels, fuel oil &and natural gas used by aforementioned vehicles.
Portugal	Entertainment: transport, accommodation or meals (except connected with conferences, seminars, fairs or exhibitions, which, under certain conditions, are deductible in 25% or 50%). Luxury and entertainment expenses. Vehicles: acquisition or hiring of light vehicles deemed to be used for non-business purposes, as well as pleasure boats, helicopters, aircrafts and motorcycles (except if intended for sale or constitute the core of the business activity). Others: fuel used in motor vehicles are deductible at 50%. Full deduction is possible if used in public transport vehicles, certain heavy vehicles, machines or tractors.
Slovak Republic	Entertainment: goods and services for the purposes of treat and entertainment. Others: suspense items (Suspense items means expenses paid on behalf and for the account of the purchaser or the customer, which the supplier charges to the purchaser or the customer.
Slovenia	Entertainment: entertainment expenses (where entertainment expenses shall include only the costs of entertainment and amusement during business or social contacts); meals (including drinks) and accommodation expenses, except expenses incurred by taxable person in connection with these supplies in the ordinary course of his business. Vehicles: yachts and boats intended for sport and recreation; aircrafts other than those used for transport of passengers and goods, leasing, renting and resale. Passenger cars and motorcycles other than: vehicles used for transport of passengers and goods, leasing, renting and resale, vehicles used in driving schools for the provision of the driver's training program in accordance with the regulations in force and combined vehicles for carrying out an activity of a public line and special line transport, and special vehicles adapted exclusively for the transport of deceased people. From 22 January 2022, an exemption from the limitation of the right to deduct VAT applies to certain personal vehicles (cars, motorcycles, bicycles, and similar vehicles with an auxiliary motor) if these vehicles are intended for the pursuit of a taxable activity of the taxable person in respect of which he is entitled by law to deduct VAT (other than the activities referred to above) and if two conditions are met cumulatively: (1) the motor vehicle is driven without emitting carbon dioxide; and (2) the value of such a vehicle, including VAT and other charges, at the time of purchase does not exceed EUR 80 000. The taxable person may also claim a right to deduct VAT on the purchase of fuels, lubricants, spare parts, and services related to these motor vehicles. Services relating to these motor vehicles are also considered to be services relating to the hiring of these motor vehicles. Others: fuels, lubricants, spare parts and services which are closely linked to vehicles above.
Spain	Entertainment: access to shows and services of a recreational character; travel, accommodation and catering services, unless they are deductible as a cost in income taxes. Others: jewelry, gold and platinum objects, pearls, precious stones; food, drinks and tobacco; goods or services used as gifts to clients, employees or third parties.
Sweden	Entertainment: representation expenditures as defined in the income tax law for which there is no tax allowance according to the income tax law (costs of a maximum of a taxable amount of SEK 300 per person and occasion regarding restaurant services). Vehicles: cars with a weight of 3500 kg or less used for both taxable and non-taxable purposes unless the purpose is for taxi, car renting, car sales or driving school. Limitation to 50 % of the right to deduct VAT on the purchase of fuel used by those vehicles. Others: Expenses connected to a permanent residence.
Switzerland	None
Türkiye	Cars: purchases of cars except when used by car renting companies. Others: Missing and stolen stocks (excluding those lost due to earthquake, flood and fire in places of compelling reason declared by Ministry of Treasury and Finance).
United Kingdom	Entertainment: business entertainment; in general terms the free provision of any hospitality to business contacts is not recoverable. The exception is where the entertainment is provided to non-UK customers. However, it is likely that if recovery is granted it would be off-set by a private use charge that would effectively cancel out any credit obtained. Vehicles: motor cars in general, except motor cars that are stock in trade (car dealers etc.); tools of the trade (driving schools etc.) or exclusively used for business purposes with no availability for private use (leasing companies etc.); lease of a motor car (right to deduction is limited to 50%).

Note: Restrictions to the right to deduct VAT on specific inputs: this table includes limitations of the right to deduct input VAT on specific goods, services and intangibles because of their nature, generally with a view to achieving the (input) taxation of their deemed final consumption. The table does not include limitations of the right to deduct input VAT related to the exemption of outputs (e.g. limited right of deduction for inputs used to provide financial and insurance services, medical care, education, etc. listed in Table 2.3 on VAT exemptions) or to deduct VAT on inputs that are not connected with a business’s taxable activity.

Source: National delegates; position as at 1 January 2022.

Annex Table 2.A.5. Annual Turnover Concessions for VAT Registration and Collection

Country	National currency	Registration thresholds1					Voluntary registration or collection2	Minimum registration period3	Limitations or specific rules 5
		Registration or collection threshold	General threshold		Other thresholds
			Nat. curr.	USD4	Nat. curr.	USD4
Australia*	AUD	R	75 000	52 083	150 000	104 167	Yes	1 year	country note
Austria6	EUR	R	35 000	45 455			Yes	5 years
Belgium6*	EUR	C	25 000	33 784			Yes	None	country note
Canada*	CAD	R	30 000	24 000	50 000	40 000	Yes	1 year	country note
Chile*	CLP	None	None						country note
Colombia*	COP	R	None		133 014 000	97 876	Yes		country note
Costa Rica	CRC	None	None						country note
Czech Republic6*	CZK	R	1 000 000	77 519			Yes	1 year	country note
Denmark6*	DKK	R	50 000	7 587	170 000	25 797	Yes	2 years	country note
					300 000	45 524
Estonia6	EUR	R	40 000	72 727			Yes	None
Finland6*	EUR	R	15 000	18 072	30 000	36 145	Yes	None	country note
France6*	EUR	R	85 800	117 534	34 400	47 123	Yes	2 years	country note
					44 500	60 959
Germany6*	EUR	C	22 000	29 543	50 000	67 143	Yes	5 years	country note
Greece6*	EUR	C	10 000	18 330			Yes	1 year	country note
Hungary6	HUF	C	12 000 000	77 419			Yes	1 year
Iceland	ISK	R	2 000 000	13 245			Yes	None
Ireland6*	EUR	R	75 000	94 937	37 500	47 468	Yes	None
Israel*	ILS	C	102 292	26 919			No	None	country note
Italy6*	EUR	C	65 000	100 000			Yes	None	country note
Japan*	JPY	R	10 000 000	100 000			Yes	2 years	country note
Korea	KRW	C	48 000 000	56 671			No	None
Latvia6	EUR	R	40 000	78 431			Yes	None
Lithuania6*	EUR	R	45 000	97 826			Yes	None	country note
Luxembourg6*	EUR	C	35 000	41 176			Yes	None	country note
Mexico	MXN	None	None
Netherlands*6*	EUR	C	20 000	25 974			Yes	3 years
New Zealand	NZD	R	60 000	40 268			Yes	None
Norway*	NOK	R	50 000	5 171	3 000 000	310 238	Yes	2 years	country note
					140 000	14 478
Poland6	PLN	R	200 000	108 696			Yes	None	country note
Portugal6*	EUR	C	12 500	21 769			Yes	5 years	country note
Slovak Republic6	EUR	R	49 790	92 240			Yes	1 year
Slovenia6	EUR	R	50 000	87 962			Yes	5 years
Spain6	EUR	None	None
Sweden6	SEK	R	30 000	3 444			Yes	3 years	country note
Switzerland*	CHF	R	100 000	90 909	150 000	136 364	Yes	1 year	country note
Türkiye*	TRY	R	None		country note				country note
United Kingdom	GBP	R	85 000	123 188			Yes	None

Notes:

* See country note.

1. Registration/collection thresholds identified in this table are general concessions that relieve domestic suppliers from the requirement to register for and/or to collect VAT until such time as they exceed a specific annual turnover threshold. Except where specifically identified, registration thresholds also relieve suppliers from the requirement to charge and remit VAT on supplies made within a particular jurisdiction. Relief from collection and/or registration may be available to specific industries or types of traders (for example non-resident suppliers) under more detailed rules, or a specific industry or type of trader may be subject to more stringent registration and collection requirements. The "R" indicates countries where a registration threshold applies, i.e. where suppliers having a turnover below the threshold are not required to register for VAT and are relieved from the obligation to charge and remit VAT. The "C" indicates countries where a collection threshold applies, i.e. where all suppliers are required to register for VAT but are not required to charge and remit VAT until they exceed the collection threshold. Thresholds shown in this table apply to businesses established in the relevant country. In most countries, the registration threshold does not apply to non-resident businesses, i.e. businesses having no seat, place of business, fixed establishment, domicile or habitual residence within the country.

2. "Yes" means a supplier is allowed to voluntarily register and collect VAT where its total annual turnover is less than the registration threshold.

3. Minimum registration/collection periods apply to general concessions. This period is the minimum term during which the concession is applied to taxpayers that have opted for it.

4. Exchange rates for conversion into USD are Purchase Parity Rates (PPPs) for GDP 2021.

5. Limitations or specific rules for application of the thresholds: restrictions or conditions to the application of the tax relief for businesses below the threshold.

6. Limitations for Member States of the European Union. Directive 2006/112/EC excludes from the application of the threshold the supply of new buildings or building land, certain supplies of new means of transport and disposals of the assets of the enterprise. The threshold does not apply to non-resident businesses. Specific thresholds also apply for certain intra-EU supplies.

Source: National delegates; position as at 1 January 2022.

Annex Box 2.A.3. Country notes to Annex Table 2.A.5. Annual Turnover Concessions for VAT Registration and Collection

Australia. For taxi drivers, including chauffeur driven limousines, hire cars and sharing economy ride-share services, there is no registration threshold. The applicable registration threshold to not-for-profit organisations is AUD 150 000.

Belgium. The registration threshold for Belgium does not apply to several sectors: real estate; hotels and restaurants; sale of used and waste materials. A number of specific supplies are also excluded from the application of the threshold: several supplies of new real estate, supplies of certain products subject to excise duties and undeclared and illicit activities.

Canada. The registration threshold does not apply to certain selected listed financial institutions; non-residents who enter Canada to make taxable supplies of admissions to a place of amusement, a seminar, an activity or an event; and persons who carry on a taxi or limousine business (which include a commercial ride-sharing business). These persons are required to register for and collect GST/HST. An alternative threshold applies to charities and public institutions. A charity or public institution is not required to register if either its revenue from worldwide taxable supplies is CAD 50 000 or less in a calendar quarter and over the last four consecutive calendar quarters, or its gross revenue in either of its two preceding fiscal years is CAD 250 000 or less.

Chile. All taxpayers are required to register and obtain a taxpayer’s identification number. However, small businesses, craftsmen and small service providers may be eligible for a special simplified regime according to which they account, for output VAT purposes, for a monthly fixed amount based on an average level of earnings. This special regime has to be calculated by taking into account the earnings from the last 12 months and there is a threshold of 20 Monthly Tax Units (CLP 1 083 420 - USD 1 274). This simplified tax regime does not apply to legal entities but to individuals only. This system must be adopted for at least for 12 months after which the taxpayer can return back to the ordinary regime.

Colombia. The VAT exemption threshold is mentioned in Tax Value Units (Unidad de Valor Tributario - TVU) in the tax code. The VAT exemption threshold is 3 500 TVU. The value of the TVU in Colombian Pesos (COP) is set every year by decree. The value for 1 TVU is COP 38 004 for fiscal year 2022. The VAT registration threshold for individuals is therefore 3 500 x 38 004 = 133 014 000 COP in 2022. The threshold for individuals that are contractors with the State, is of 4 000 TVU (i.e. 152 016 000 COP in 2022). There is no VAT registration threshold for incorporated businesses.

Costa Rica. Small businesses, craftsmen, small fisheries and farmers as well as small service providers can opt for a special simplified VAT and income tax regime, provided that the amount of their annual purchases does not exceed 350 base salaries (CRC 69 330 000 approximately USD 100 770) inclusive of VAT, employ a maximum of 5 employees, and their total assets do not exceed 150 base salaries (CRC 69 330 000 approximately USD 100 770). Businesses which perform as exclusive importer or distribution for the sale goods or services are not able to register under this regime as well as those that exploit franchise business.

Czech Republic. A taxable person that is not established in the Czech Republic should register immediately once it starts to provide any taxable supply within the territory of the country, except for supplies being subject to the reverse charge mechanism or to the one-stop shop (OSS).

Denmark. A higher threshold of DKK 170 000 (EUR 22 840) applies to the blind, and a threshold of DKK 300 000 (EUR 40 300) applies to the first sale of works of art by their creator or his successors in title. For the purposes of the latter exemption, the threshold of DKK 300 000 must not have been exceeded in the current or preceding year.

Finland. Where a business exceeded the registration threshold of EUR 15.000, it must register and is subject to VAT but a graduated tax relief is available until they reach a second threshold of EUR 30 000..

France. VAT relief applies to businesses whose annual turnover does not exceed EUR 85 800 or when their turnover does has not exceeded EUR 94 300 the preceding calendar year (when the turnover has not exceeded EUR 85 800 the penultimate year). For supplies of services (except hotel accommodation and food and drink in restaurants), the annual turnover must not exceed EUR 34 400 or EUR 36 500 the preceding calendar year (when the turnover has not exceeded EUR 34 400 the penultimate year). For lawyers (in the furtherance of their regulated business), writers and artists, the turnover must not exceed EUR 44 500 (the threshold is EUR 18 300 for their supplies outside the normal framework of their affairs). Experimentally, a specific threshold of EUR 100 000 has been implemented in Guadeloupe, Martinique and La Réunion until 31 December 2022.

Germany. Taxpayers are relieved from VAT obligations if their annual turnover does not exceed EUR 22 000 and their expected turnover for the current calendar year will not exceed EUR 50 000.

Greece. If the annual turnover from taxable supplies is less than EUR 10 000, a business can voluntarily enter the Special Scheme for small businesses under which no VAT is collected. New businesses may also enter the Special Scheme upon registration. Farmers under the flat-rate scheme are not eligible to enter the Special Scheme for small businesses. Small businesses that have entered the Special Scheme will be obliged to enter the “normal” scheme and collect VAT from the moment they perform a taxable supply on account of which they exceed the threshold (and for the full value of that supply). In case the administrative period is less than a year, then the value of the taxable supplies for the purpose of determining whether the business may enter the Special Scheme during the next year is calculated on a proportional basis.

Ireland. The general turnover threshold for the supply of goods is EUR 75 000. Persons supplying goods liable at the reduced or standard rates which they have manufactured or produced from zero-rated materials must however register if their turnover is EUR 37 500 or more. The general turnover threshold for the supply of services is EUR 37 500. For persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to in the previous sentence) are subject to the threshold for the supply of goods applies.

Israel. Self-employed persons with annual revenue below NIS 102 292 are considered "Exempt Dealers". Some professions are not allowed to be Exempt Dealers: agronomist, architect, practical engineer, technician, private investigator, rabbinical attorney, dental technician, organizational consultant, management consultant, scientific consultant, tax consultant, economist, engineer, surveyor, bookkeeper, translator, insurance agent, lawyer, accountant or appraiser, chemical or medical laboratory owner, artistes, various others in show business, doctor, psychologist, physiotherapist, veterinary surgeon, dentist, driving school owner, school or kindergarten owner, real estate agent or dealer, test preparation, testing and supervision, lecture, teaching, writing, shorthand, translation, writing, editing, car dealer or broker.

Italy. The micro-sized taxpayers’ scheme (“Regime forfetario”) applies to individual businesses if, in the previous year, they earned revenues or received remuneration, calculated per year, not exceeding EUR 65 000 and the gross expenses for employees do not exceed EUR 20 000. The regime does not apply to persons who are members of partnerships, professional associations or SRLs (limited liability companies) and are subject to the "regime di trasparenza" for income tax; persons who carry out sale of buildings or land or intra-EU supplies of new cars and trucks. Are also excluded, foreign businesses not established in Italy, except for those that are established in one of the EU Member States, or in a State party of the European Economic Area, and produce in Italy at least 75 percent of their total revenue.

Japan. Domestic and foreign businesses (both companies and individuals) whose taxable sales in Japan are less than 10 million yen, as well as new businesses of up to 2 years (except for the subsidiary of a certain large corporation) are exempt from Japanese Consumption Tax (JCT) return. Exempted businesses can opt to be liable for Consumption Tax, in which case they shall remain liable for at least two years.

Luxembourg. Taxpayers established in Luxembourg are entitled to opt for the special scheme; the exemption only applies to goods and services supplied in Luxembourg. Taxpayers can opt out of the special scheme but have then to apply the normal VAT rules for at least five years.

Netherlands. The special scheme for small businesses applies to all businesses, irrespective of their legal form and including corporate businesses (e.g. foundations, private and limited companies).

Norway. The higher threshold of NOK 3 000 000 applies for admission to sporting events. The higher threshold of NOK 140 000 applies to charitable institutions and organisations.

Poland. The registration threshold does not apply to taxpayers supplying (a) certain types of silver, gold, platinum, knives, cutlery, jewellery, non-hazardous metal waste, museum collections and coins; (b) goods subject to excise duty with a number of exceptions; (c) certain buildings, structures and their parts; (d) building land; (e) new means of transport. The threshold does also not apply to taxpayers supplying (a) legal services; (b) consulting and expert services with certain exceptions; (c) jeweller services and taxpayers not established in Poland. Supplies of certain goods bought remotely such as computers, electrical household appliances, cosmetics, toilet preparations and parts and accessories to cars and motorcycles are excluded from the exemption.

Portugal. The collection threshold does not apply to commercial legal entities.

Sweden. The threshold does not apply to taxable persons not established in Sweden, taxable persons voluntarily registered for VAT for rental of immovable property, trade with investment gold and artists. From 1 July 2022, the threshold is raised to 80 000 SEK.

Switzerland. The thresholds refer to the worldwide turnover. The higher threshold of CHF 150 000 applies to not-for-profit, sports and cultural associations and to public interest institutions.

Türkiye. Certain small individual taxpayers who are exempt from Personal Income Tax are also exempt from VAT.

Annex Table 2.A.6. Usage of margin schemes

Country	Usage of margin schemes1
Australia	A margin scheme can be used on certain sales of real property. It is generally based on the difference between the tax inclusive sale price and the original purchase price. Special rules apply in certain cases, such as sales between associates or members of the same GST group. Gambling: GST applies to the gambling margin calculated based on the total amount wagered less total monetary prizes awarded. Second hand goods: when second-hand dealers adopt a special 'global' accounting method. It applies when (1) second-hand goods are acquired from an unregistered supplier and are divided up for re-supply and (2) the dealer exercises the option to apply the global method over a specified category of second-hand good.
Austria	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Belgium	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Canada	-
Chile	Used real estate property in which no value added tax has been paid, made by a professional seller. The tax base is the difference between the sale and purchase prices. For these purposes, the acquisition value of the property must be readjusted in accordance with the variation percentage experienced by the consumer price index in the period between the month prior to the acquisition and the month prior to the sale date. However, in the determination of the referred tax base, the value of the land included in both operations must be deducted from the purchase price and the sale price. For these purposes, the seller must deduct from the sale price the commercial value of the land at the date of the operation. Once this deduction has been made, the seller must deduct from the purchase price of the property an amount equivalent to the percentage that represents the commercial value assigned to the land in the sale price.
Colombia	Sale of used cars, commission gained by the intermediary by selling fixed assets, sale of gasoline; cleaning services; cafeteria services; safety services under authorisation of the Superintendence of Safety.
Costa Rica	Second-hand goods. Taxpayers have to be registered under the Special regime of second-hand goods.
Czech Republic	Travel agencies; second- hand goods; works of art; collector’s items and antiques (EU Directive).
Denmark	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Estonia	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Finland	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
France	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive); supply of building land; supply of a building completed more than five years ago, when taxed (option).
Germany	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Greece	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive); sales by public auction
Hungary	Travel agencies; second-hand goods; works of art, antiques, collectors’ items (EU Directive).
Iceland	-
Ireland	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive). Mandatory margin scheme for auctioneers and travel agents.
Israel	Sale of used furniture by a dealer whose business is the sale of such furniture. Sale of used vehicle, motorcycle or cross-country vehicle by a dealer whose business is a purchase and sale of used vehicles. Sale of dwellings by a real estate dealer who acquired it from a person who is not a non-profit organisation, a financial institution nor a dealer. Sale of coins and medals, which the seller has purchased such coins and medals from a non-licensed dealer (i.e. not VAT registered business). Sale of postage stamps and revenue stamps by a person whose business is the sale of such stamps (deemed to be a service). Sale of foreign currency, securities or other negotiable instruments, including the acquisition of aforesaid securities and instruments in order to collect their redemption or retirement price, by a dealer whose business is the sale of such assets or the sale of foreign currency, shall be deemed to be a brokerage service rendered by the dealer, between the dealer's supplier and the dealer's customer.
Italy	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Japan	-
Korea	-
Latvia	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Lithuania	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Luxembourg	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Mexico	Sale of used cars, previously acquired by a company from an individual.
Netherlands	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
New Zealand	-
Norway	Voluntary margin scheme for second hand goods, works of art, collectors’ items and antiques.
Poland	Travel agencies; second-hand goods; works of art; collector's items and antiques (EU Directive).
Portugal	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive) and fuel retailers.
Slovak Republic	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Slovenia	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Spain	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Sweden	Travel agencies; second-hand goods, works of art, collector's items and antiques (EU Directive).
Switzerland	Collector’s items such as works of art, antiques and suchlike.
Türkiye	Travel agencies (commission taken from tours sold abroad is exempt; commission taken from tours sold in Türkiye is subject to tax). Deliveries of second hand motor vehicles or immovable properties (without making any fundamental changes in their nature) by taxpayers that are in second hand motor vehicles or immovable property business after purchasing them from non-VAT-Taxpayers (including purchases from taxpayers in the scope of exemption); The tax base in the delivery and import of gold jewellery and coins is the amount remaining after the gold ingot is deducted.
United Kingdom	Travel agencies; second-hand goods, works of art, collector's items and antiques.

Note:

1. Margin scheme: In this context, a margin scheme means a scheme where the tax base is calculated on the difference between the price paid by the taxpayer for an item and the resale price rather than on the full selling price. The reseller is not allowed to deduct the input VAT embedded in the buying price of the items resold under the margin scheme.

Source: National delegates; position as at 1 January 2022.

Annex Table 2.A.7. VAT Revenue Ratio (VRR) 2020

	Standard VAT rate 2020	2000	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	Diff 2018 2020
Australia	10		0.55	0.53	0.53	0.48	0.50	0.48	0.46	0.45	0.48	0.48	0.49	0.49	0.49	0.47	0.46	0.51	0.04
Austria	20	0.61	0.58	0.57	0.58	0.59	0.58	0.58	0.58	0.59	0.58	0.58	0.59	0.59	0.60	0.60	0.60	0.58	-0.02
Belgium	21	0.51	0.50	0.51	0.51	0.49	0.47	0.49	0.48	0.48	0.47	0.47	0.46	0.47	0.47	0.47	0.47	0.45	-0.03
Canada	5	0.49	0.49	0.46	0.50	0.49	0.48	0.48	0.47	0.47	0.46	0.47	0.48	0.48	0.49	0.49	0.49	0.48	-0.02
Chile	19	0.65	0.68	0.66	0.70	0.73	0.62	0.65	0.66	0.66	0.66	0.65	0.66	0.64	0.65	0.66	0.64	0.64	-0.02
Colombia	13	0.35	0.42	0.47	0.45	0.48	0.43	0.44	0.49	0.46	0.41	0.42	0.41	0.38	0.37	0.38	0.39	0.35	-0.04
Costa Rica	19																0.43	0.45	0.45
Czech Republic	21	0.42	0.56	0.52	0.54	0.56	0.55	0.52	0.55	0.57	0.56	0.58	0.58	0.60	0.62	0.61	0.61	0.59	-0.02
Denmark	25	0.59	0.62	0.64	0.65	0.61	0.58	0.57	0.58	0.58	0.56	0.57	0.57	0.59	0.61	0.62	0.61	0.64	0.02
Estonia	20	0.71	0.70	0.82	0.81	0.67	0.74	0.67	0.68	0.69	0.67	0.70	0.73	0.73	0.75	0.75	0.74	0.72	-0.02
Finland	24	0.61	0.61	0.61	0.60	0.58	0.56	0.55	0.56	0.56	0.55	0.55	0.54	0.55	0.56	0.57	0.57	0.58	0.01
France	20	0.51	0.52	0.52	0.51	0.50	0.47	0.48	0.48	0.48	0.48	0.48	0.49	0.49	0.50	0.51	0.51	0.49	-0.02
Germany*	19	0.61	0.55	0.57	0.55	0.56	0.55	0.55	0.56	0.56	0.55	0.55	0.56	0.56	0.56	0.57	0.57	0.57	0.00
Greece	24	0.45	0.47	0.46	0.48	0.46	0.39	0.45	0.38	0.37	0.36	0.38	0.39	0.44	0.43	0.44	0.43	0.38	-0.06
Hungary	27	0.52	0.48	0.55	0.58	0.56	0.61	0.52	0.51	0.52	0.52	0.56	0.59	0.55	0.56	0.59	0.59	0.59	0.00
Iceland	24	0.58	0.61	0.63	0.59	0.51	0.44	0.42	0.42	0.43	0.43	0.44	0.51	0.53	0.57	0.54	0.50	0.46	-0.08
Ireland*	23	0.61	0.66	0.67	0.63	0.55	0.46	0.48	0.46	0.44	0.45	0.48	0.48	0.48	0.48	0.49	0.50	0.45	-0.05
Israel	17	0.63	0.62	0.62	0.66	0.66	0.66	0.66	0.66	0.65	0.65	0.64	0.64	0.64	0.64	0.64	0.62	0.64	0.01
Italy	22	0.43	0.39	0.41	0.41	0.39	0.36	0.40	0.40	0.37	0.37	0.37	0.37	0.37	0.39	0.38	0.39	0.38	-0.01
Japan	10	0.68	0.70	0.70	0.68	0.67	0.66	0.68	0.68	0.69	0.70	0.69	0.73	0.72	0.72	0.72	0.69	0.71	-0.01
Korea	10	0.58	0.61	0.60	0.60	0.60	0.62	0.64	0.64	0.66	0.64	0.66	0.60	0.66	0.69	0.68	0.69	0.70	0.02
Latvia	21	0.50	0.57	0.60	0.60	0.49	0.38	0.42	0.43	0.46	0.49	0.50	0.52	0.54	0.54	0.58	0.59	0.61	0.03
Lithuania	21	0.52	0.52	0.56	0.61	0.58	0.47	0.49	0.51	0.50	0.50	0.51	0.51	0.51	0.53	0.53	0.54	0.54	0.02
Luxembourg	17	0.66	0.82	0.79	0.92	0.91	0.92	0.93	0.98	1.03	1.08	1.15	0.74	0.76	0.77	0.76	0.76	0.77	0.01
Mexico	16	0.25	0.29	0.32	0.32	0.33	0.30	0.32	0.31	0.31	0.28	0.32	0.32	0.33	0.32	0.34	0.33	0.37	0.03
Netherlands	21	0.57	0.55	0.57	0.58	0.56	0.52	0.54	0.52	0.52	0.47	0.47	0.49	0.51	0.52	0.53	0.56	0.58	0.05
New Zealand	17	0.97	1.01	1.02	0.95	0.96	0.96	1.09	0.92	0.93	0.93	0.95	0.95	0.94	0.96	0.95	0.95	1.02	0.07
Norway	25	0.67	0.57	0.61	0.63	0.57	0.55	0.56	0.56	0.57	0.57	0.56	0.56	0.57	0.57	0.58	0.57	0.60	0.02
Poland	23	0.42	0.47	0.50	0.53	0.50	0.45	0.47	0.48	0.43	0.43	0.44	0.44	0.45	0.49	0.51	0.51	0.51	0.00
Portugal	23	0.60	0.56	0.51	0.51	0.49	0.43	0.48	0.45	0.47	0.46	0.49	0.50	0.49	0.51	0.52	0.53	0.49	-0.03
Slovak Republic	22	0.43	0.61	0.58	0.53	0.53	0.47	0.46	0.49	0.43	0.47	0.49	0.52	0.50	0.52	0.52	0.53	0.51	-0.01
Slovenia	22	0.68	0.67	0.68	0.69	0.68	0.59	0.59	0.59	0.57	0.59	0.58	0.58	0.58	0.59	0.60	0.58	0.54	-0.06
Spain	21	0.52	0.56	0.56	0.52	0.41	0.29	0.44	0.38	0.40	0.39	0.41	0.43	0.43	0.44	0.45	0.44	0.42	-0.03
Sweden	25	0.51	0.54	0.55	0.56	0.57	0.55	0.57	0.57	0.55	0.55	0.55	0.57	0.58	0.59	0.59	0.59	0.60	0.01
Switzerland	7.7	0.73	0.72	0.73	0.72	0.73	0.69	0.71	0.69	0.70	0.70	0.69	0.68	0.67	0.68	0.68	0.67	0.68	0.00
Türkiye*	18	0.46	0.40	0.42	0.38	0.37	0.36	0.41	0.44	0.40	0.44	0.40	0.42	0.40	0.41	0.40	0.34
United Kingdom	20	0.44	0.44	0.44	0.45	0.43	0.43	0.44	0.44	0.43	0.44	0.44	0.45	0.44	0.45	0.45	0.45	0.44	-0.02
Unweighted average		0.56	0.57	0.58	0.59	0.56	0.53	0.55	0.54	0.54	0.54	0.55	0.54	0.55	0.56	0.56	0.55	0.56

Notes:

Calculation formula: VRR = VAT Revenue/[(Consumption - VAT revenue) x standard VAT rate]. Consumption = Final Consumption Expenditure (Heading P3) in national accounts. VAT rates used are standard rates applicable as at 1 January of each year.

Time series: Since data beyond 2020 is not available for all countries at the time of publication, VRR is not calculated after this date.

Canada: VRR Calculation includes federal VAT only.

Canada, Japan and New Zealand. Annual final consumption expenditure in national accounts was adjusted to ensure matching between the fiscal year for the VAT revenue and the civil year for final consumption figures.

Israel. Although VAT was implemented in Israel in 1976, the VRR is only calculated from 1996 onwards since tax revenue figures are not available before that year.

Japan: The standard VAT rate used to calculate the VRR for 2014 includes the increase from 8% to 10% on 1 April 2014 (i.e. uses the average VAT rate (5X3+8X9)/12=7.25 %).

Germany: The standard VAT rate used to calculate the VRR for 2020 takes the temporary reduction 19% to 16% from 1 July to 31 December 2020 (i.e. average VAT rate (6X19+6X16)/12=%).

Ireland : The standard VAT rate used to calculate the VRR for 2020 takes the temporary reduction from 23% to 21% from 1 September 2020 until 28 February 2021 (i.e. average VAT rate (23X8+21X4)/12=22.3%).

Luxembourg: The value of the Consumption expenditure in national accounts was revised upwards by 8% on average since 2010, which involves a slight reduction in the VRRs for the years before 2020 compared to the previous editions.

Türkiye: Consumption expenditure data was not available for 2020 at the time of the preparation of this edition.

Source: OECD.

Annex Table 2.A.8. Mechanisms for collecting VAT on cross-border supplies of services and intangibles1 by non-resident suppliers ("inbound supplies").

Country5	Regime for the collection of VAT on inbound supplies of services and intangibles by non-resident suppliers2	Threshold4
Australia	B2C supplies: the non-resident supplier is required to register collect and remit the GST. Simplified "pay-only" registration and reporting is available; standard GST registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required but is allowed. Digital platforms6 (Electronic Distribution Platforms) are liable to collect GST on inbound supplies made through them (Full liability regime). B2B supplies: out of scope; the business customer is liable to account for GST under the reverse-charge mechanism only if it cannot claim a full GST credit (i.e. input taxed supply or partly for personal consumption). Criteria for distinguishing B2C from B2B supplies: Australian Business Number (ABN) of the customer; and a statement that the customer is registered for GST. Supplies covered by the B2C rule3: inbound supplies of services and intangibles (anything other than goods or real property), including digital and non-digital services such as e-books, music, videos, software downloads, accounting, architectural or legal services. Proxies for determining the place of taxation3 B2C: The supply is connected with Australia i.e. made to a consumer that is resident in Australia. B2B: Customers tax residence status (i.e. Australian Business Number (ABN)). Implementation: as of 1 July 2017.	AUD 75 000 (USD 51 000) Same as for domestic suppliers
Austria	European Union scheme (see below)
Belgium	European Union scheme (see below)
Canada	B2C supplies: the non-resident supplier is required to register and collect the GST. Simplified "pay-only" registration and reporting is available; standard GST registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required but is allowed. Digital platforms6 (Distribution Platform Operators) are liable to collect GST on inbound supplies made through them (Full liability regime). B2B supplies: the customer is liable to account for GST under the reverse-charge mechanism. Criteria for distinguishing B2C from B2B supplies: The Canadian GST registration number of the customer. Supplies covered by the B2C rule3: inbound supplies of services and intangibles (anything other than goods or real property). Proxies for determining the place of taxation3 B2C: The consumer’s usual place of residence. B2B: Customer’s GST/HST residence. Implementation: as of 1 July 2021.	CAD 30 000 (USD 25 000) Same as for domestic suppliers
Chile*	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard VAT registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required but is allowed. Digital platforms6 are not liable to collect the VAT on inbound supplies made through them but have rather an information sharing obligation with the tax authorities (Information sharing obligation). A Withholding7 regime applies for the collection of VAT on inbound B2C supplies of services and intangibles when the supplier has not registered to account for the VAT on such supplies. B2B supplies: the customer is liable to account for VAT under the reverse-charge mechanism. Criteria for distinguishing B2C from B2B supplies: Tax ID Number (TIN) of the customer; statement that the business is registered for VAT. Supplies covered by the B2C rule3: inbound supplies of digital entertainment content, such as videos, music, games or other analogous content, digital magazines, newspapers and books, provision of software, storage, or computing platforms or infrastructure. Proxies for determining the place of taxation3 B2C: the supply is performed or used in Chile (primary legislation) i.e. if two of the following elements indicate a connection to Chile: IP address or other geolocation method, , billing or shipping address provided, SIM card with Chile country code is used (secondary legislation). B2B: Customers tax residence status (Tax ID Number). Implementation: as of 1 July 2021.	No registration threshold
Colombia	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard VAT registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms are liable to collect the VAT on inbound supplies made through them (Full liability regime). A Withholding regime7 applies for the collection of VAT on inbound B2C supplies of services and intangibles when the supplier voluntarily opts for the use of this mechanism. Withholding is conducted by financial intermediaries based on a list of suppliers provided by the Tax Administration. B2B supplies: the customer is liable to account for VAT under the reverse-charge mechanism. Criteria for distinguishing B2C from B2B supplies: the Colombian VAT registration number of the customer. Supplies covered by the B2C rule3: inbound supplies of services and intangibles performed through electronic commerce. Proxies for determining the place of taxation3 B2C: The customer is a tax resident in Colombia. B2B: Customer’s tax residence status (Colombian VAT registration number). Implementation: as of 15 January 2019.	No registration threshold
Costa Rica	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard VAT registration is not allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms are liable to collect the VAT on inbound supplies made through them (Full liability regime). A Withholding regime7 applies for the collection of VAT on inbound B2C supplies of services and intangibles when the supplier has not registered to account for the VAT on such supplies. Financial intermediaries have a withholding obligations for a list of foreign providers and intermediaries provided by the Tax Administration. B2B supplies: the customer is liable to account for VAT under the reverse-charge mechanism if the supplier has not registered for VAT. Criteria for distinguishing B2C from B2B supplies: the Costa Rican VAT registration number of the customer. Supplies covered by the B2C rule3: inbound supplies of services and intangibles (anything other than goods or real property). Proxies for determining the place of taxation3 B2C: the supply is carried out or consumed in the country (primary legislation) i.e. the address where the service is delivered corresponds to Costa Rica, the underlying supplier of an intermediated service is based in Costa Rica, the fixed landline or the IP address of the customer corresponds to Costa Rica, the SIM card with Costa Rica country code is used, the address of the customer is in Costa Rica, country where the payment method was issued (e.g. credit card), any other information in the possession of the supplier or intermediary that allows to reasonably identify the place of consumption. In case of conflict, alphabetical order priority applies. B2B: Customers tax residence status (Costa Rican VAT registration number). Implementation: as of 1 July 2019.	No registration threshold
Czech Republic	European Union scheme (see below)
Denmark	European Union scheme (see below)
Estonia	European Union scheme (see below)
Finland	European Union scheme (see below)
France	European Union scheme (see below)
Germany	European Union scheme (see below)
Greece	European Union scheme (see below)
Hungary	European Union scheme (see below)
Iceland	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard VAT registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms are liable to collect the VAT on inbound supplies made through them (Full liability regime). B2B supplies: exempt if the customer has a full right of deduction. If not, a reverse-charge mechanism applies. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer. Supplies covered3: electronically supplied services and non-digital services such as services of consultants, lawyers, accountants and other similar specialised services. Proxies for determining the place of taxation3 B2C: customer’s usual residence. B2B: customer’s location (permanent place of business Icelandic VAT registration number). Implementation: 1 November 2011.	ISK 2 million (USD 14 600) Same as for domestic suppliers
Ireland	European Union scheme (see below)
Israel	B2C supplies: the customer must self-assess the VAT. B2B supplies: the customer is liable to account for VAT under the reverse-charge mechanism. Supplies covered3: services, including digital services. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer. Proxies for determining the place of taxation3 B2C and B2B: the residence of the customer is in Israel or the supply is connected to an asset in Israel. Implementation: 1 November 2011.	N.A.
Italy	European Union scheme (see below)
Japan	B2C supplies: the non-resident supplier is required to register and collect the VAT. Standard registration is required. The non-resident service provider, which does not maintain a branch or an office in Japan, must appoint a tax agent to register under the standard registration procedure. No simplified registration procedure is available. Digital platforms. No special rules exist for digital platforms. The underlying supplier is required to collect and remit the tax (Mere vendor regime). B2B supplies: reverse-charge mechanism applies: non-resident businesses are required to notify their Japanese customers that they (customers) are required to account for VAT under the reverse-charge mechanism. Criteria for distinguishing B2C from B2B supplies: the nature of the services provided. Supplies covered by B2C rule3: Electronic services as defined by law (e.g. online e-books, online game, music movies, cloud services, Internet shopping or auction site). Proxies for determining the place of taxation3 B2C and B2B: the place where the customer is located (i.e., address or domicile for private customers and head office or principal office for businesses). Implementation: 1 October 2015.	JPY 10 million (USD 98.500) Same as for domestic suppliers
Korea	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard registration is allowed for non-resident businesses. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms are liable to collect the VAT on inbound supplies made through them (Full liability regime). B2B supplies: out of the scope. Criteria for distinguishing B2C from B2B supplies: the nature of the services provided and the Korean Business Number of the customer. Supplies covered by the B2C rule3: Electronic services as defined by law (e.g. applications, games, music, films, electronic documents, software, etc.). Proxies for determining the place of taxation3 B2C: the residence of the customer is in Korea. B2B: not applicable. Implementation: 1 July 2015.	No threshold
Latvia	European Union scheme (see below)
Lithuania	European Union scheme (see below)
Luxembourg	European Union scheme (see below)
Mexico*	B2C and B2B supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; additionally, standard registration is allowed for non-resident suppliers. The appointment of a tax representative is required. Digital platforms are liable to collect the VAT on inbound supplies made through them (Full liability regime). B2B supplies: the customer must apply the reverse charge mechanism if the non-resident supplier has not registered for VAT in Mexico. Criteria for distinguishing B2C from B2B supplies: not applicable. Supplies covered: defined digital supplies such as downloads or access to images, movies, text, information, videos, audio, music, games, as well as other multimedia content, but does not apply to e-books or electronic versions of newspapers and magazines. The defined digital services also include online learning, tests or exercises and online clubs and dating sites. Proxies for determining the place of taxation3: B2C and B2B: the supply takes place in the Mexico (primary legislation). Non-resident suppliers can use proxies to identify the place where these supplies take place including: the location of the customer, the location of the IP address of the device used by the customer; the country of issuance or registration of the card, bank account or other method of payment used or the country code of the mobile phones’ SIM card being used (secondary legislation). Implementation: 1 June 2020.	No threshold
Netherlands	European Union scheme (see below)
New Zealand	B2C supplies: the non-resident supplier is required to register and collect the GST. Simplified "pay-only" registration and reporting is available; full standard GST registration is allowed. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms (Electronic Distribution Platforms) are liable to collect GST on inbound supplies made through them (Full liability regime). B2B supplies: out of scope; a reverse-charge mechanism applies if the purchaser’s taxable supplies are mostly exempt from GST (e.g. financial services) or the services are partly used for personal consumption. Criteria for distinguishing B2C from B2B supplies: New Zealand GST registration number or business number. The Commissioner of Inland Revenue can prescribe or agree to an alternative method taking into account the nature of the supply, the value of the supply and the terms and conditions of the provision of services. Supplies covered by the B2C rule3: remote services, including digital services such as e-books, music, videos and software downloads and non-digital services such as general insurance, consulting, accounting and legal services. Proxies for determining the place of taxation3 B2C: customer's tax residence. B2B: customer’s tax residence. Implementation: 1 October 2016.	NZD 60 000 (USD 41 000) Same as for domestic suppliers
Norway	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; full standard VAT registration is allowed. Fully digital registration is available for the simplified "pay-only" registration. The appointment of a tax representative is not required. Digital platforms (Electronic Distribution Platforms) are liable to collect VAT on inbound supplies made through them (Full liability regime). B2B supplies: the reverse-charge mechanism applies. Supplies covered by the B2C rule3: telecommunication, radio and television broadcasting and electronically supplied services (TBE services). Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer Proxies for determining the place of taxation3 B2C: Customers usual residence. B2B: Customers location. Implementation: 1 July 2011.	NOK 50 000 (USD 5 000) Same as for domestic suppliers
Poland	European Union scheme (see below)
Portugal	European Union scheme (see below)
Slovak Republic	European Union scheme (see below)
Slovenia	European Union scheme (see below)
Spain	European Union scheme (see below)
Sweden	European Union scheme (see below)
Switzerland	B2C supplies of electronic and telecommunication services: the non-resident supplier must register for VAT under the standard registration procedure. Standard registration. No simplified registration procedure is available. The appointment of a tax representative is required. Digital platforms. No special rules exist for digital platforms. The underlying supplier is required to collect and remit the tax (Mere vendor regime). B2B supplies and other B2C supplies of services with place of taxation in Switzerland by reference to the customer’s location: most of the inbound supplies of services and intangibles are taxed under the reverse-charge mechanism, unless the non-resident supplier is registered for VAT (e.g. to account for B2C supplies). NB: for B2C supplies of services other than electronic and telecommunication services, the final consumer in Switzerland must self-assess the VAT only if its purchases of such services exceed CHF 10 000 per year. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer. Proxies for determining the place of taxation3 B2C: Customers usual residence. B2B: Customers location. Implementation: 1 January 2010.	CHF 100 000 (USD 87 000) The threshold refers to the global turnover of the supplier NB: until 2018, the CHF 100 000 threshold referred to supplies for which the place of supply is deemed to be on Swiss territory)
Türkiye	B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified registration and reporting is available, with right to input VAT deduction Fully digital registration is available for the simplified registration The appointment of a tax representative is not required. Digital platforms (electronic marketplaces) are liable to collect VAT on inbound supplies made through them (Full liability regime). B2B supplies: reverse-charge mechanism applies. Supplies covered by the B2C rule3: electronic services. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer. Proxies for determining the place of taxation3 B2C: Customer’s usual residence. B2B: Customer’s location. Implementation: 1 January 2018.	No threshold
United Kingdom*	B2C supplies: the non-resident supplier is required to register and collect the VAT (standard registration). Digital platforms (electronic marketplaces) are liable to collect VAT on inbound electronically supplied services made through them (Full liability regime). B2B supplies: the reverse charge mechanism applies. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer or other reasonable evidence that the customer is in business. Supplies covered by the B2C rule3: telecommunication, electronic and broadcasting services. Proxies for determining the place of taxation3 B2C: Customers usual residence. B2B: Customers location. Implementation: 1 January 2021.	No threshold
European Union*	VAT collection mechanism: B2C supplies: the non-resident supplier is required to register and collect the VAT. Simplified "pay-only" registration and reporting is available; standard VAT registration is allowed for non-resident EU businesses under the One Stop Shop (OSS) mechanism. Non-EU suppliers can opt to register for VAT under the One Stop Shop non -Union part mechanism to collect and remit VAT due on their B2C supplies of services in all EU Member States. Fully digital registration and reporting are available for the simplified "pay-only" registration. The appointment of a tax representative is not required. B2B supplies: the reverse charge mechanism applies. Criteria for distinguishing B2C from B2B supplies: VAT registration number of the customer. Supplies covered by the B2C rule3: telecommunication, electronic and broadcasting services. Proxies for determining the place of taxation3 B2C: Customer’s usual residence. B2B: Customer’s location. Implementation: 2003 for non-EU suppliers; 2015 for intra-EU suppliers; 2021 for the EU VAT Package also covering intra-EU supplies and imports of low-value goods within the EU.	No threshold (EUR 10 000 for intra-EU supplies)

Notes:

* See country note

1. In the context of this table:

“Services and intangibles” refer to any supply of services and intangibles by a non-resident supplier (without any physical presence in the customer’s country).

“Pay-only registration” refers to a VAT registration regime for non-resident suppliers that seeks only the collection of VAT on inbound supplies of services and intangibles from these suppliers, without granting the right for these suppliers to deduct any VAT incurred in the taxing jurisdiction (although a refund or other relief procedure may be available).

2. The supplies covered in this table are those covered by the International VAT/GST Guidelines 3.1 to 3.4 and Guideline 3.6. Are therefore not covered in this table, the on-the spot supplies (Guideline 3.5), and supplies of services and intangibles subject to specific place of taxation rules including supplies directly connected to a specific immovable property, which are covered by Guidelines 3.7 and 3.8. For the purpose of this table, the term “digital platform” refers to platforms that enable, by electronic means, direct interactions between buyers and sellers.

3. Some jurisdictions may limit the application of the International VAT/GST Guidelines 3.1 to 3.4 and/or Guideline 3.6 to certain categories of service supplies. Other place of taxation or VAT collection methods may therefore apply to supplies that are not covered by this definition.

4. The threshold applies for the registration of non-resident suppliers in the jurisdiction of taxation. The amount in local currency is converted into USD according to the OECD Purchase Power Parity rate for GDP (PPPs) 2021.

5. Only national taxes are included in this table. Sub-national VATs are not included.

6. For the purpose of this table “Digital platforms” is used as a generic term to describe the platforms that enable, by electronic means, direct interactions between two or more customers or participant groups, typically buyers and sellers. Digital platforms have two key characteristics: (i) each group of participants (e.g. online buyers and sellers) are users and therefore customers of the platform in some meaningful way, and (ii) the platform enables a direct interaction between these groups of participants (e.g. online sales of goods or services).

7. For the purpose of this table a withholding regime refers to any regime or measure that makes financial intermediaries, such as banks and PSPs, responsible for the collection of VAT on payments for taxable services and intangibles.

Source: National delegates; position as at 1 January 2022.

Annex Box 2.A.4. Country notes to Annex Table 2.A.8. Mechanisms for collecting VAT on cross-border supplies of services and intangibles¹ by non-resident suppliers ("inbound supplies").

Chile. Non-resident suppliers providing digital services to final consumers (B2C) in Chile (i.e. customers that are not registered for VAT purposes in Chile) are required to register under a simplified “pay only” registration and collection regime. Registration under the standard registration procedure is also available. Digital platforms are liable to collect the VAT on inbound supplies of these services made through them and remit the tax in Chile. The services covered include notably the supply of digital entertainment content, software and data storage. Such supplies are taxable in Chile provided that they are “consumed within the country”. Foreign suppliers are able to use proxies as evidence to identify the place of consumption. These proxies include: the location of the IP address of the device used by the customer (or another geolocation mechanism) at the time of contracting or paying the services; the country of issuance or registration of the card, bank account or other method of payment used; the invoicing address; and/or the country code of the mobile phone´s SIM card being used. Two items of non-contradictory evidence are required. There is no registration threshold and foreign suppliers are in principle requested to register from the first sale to Chilean consumers. B2B supplies continue to be subject to a reverse charge mechanism if the customer is registered for VAT in Chile.

Mexico. Non-resident suppliers providing digital services to consumers (B2C and B2B) in Mexico are required to register under a simplified “pay only” registration and collection regime. This registration does not grant the right to the registered businesses to deduct VAT incurred in Mexico. The registration does not generate a permanent establishment for income tax purposes in Mexico. Digital platforms are liable to collect the VAT on inbound supplies made through them and to remit it to the Mexican tax authorities. The digital services covered include notably downloads or access to images, movies, text, information, videos, audio, music, games, as well as other multimedia content, but does not apply to e-books or electronic versions of newspapers and magazines. The defined digital services also include online learning, tests or exercises and online clubs and dating sites. Such supplies are taxable in Mexico provided they “take place” in the country. Non-resident suppliers are able to use proxies as evidence to identify the place where these supplies take place. These proxies include: the location of the customer; the location of the IP address of the device used by the customer; the country of issuance or registration of the card, bank account or other method of payment used; or the country code of the mobile phone´s SIM card being used. There is no registration threshold and non-resident suppliers are in principle requested to register 30 days after the first sale to Mexican consumers. B2B supplies continue to be subject to a reverse charge mechanism if non-resident suppliers are not registered for VAT in Mexico. Non-resident suppliers are required to provide information to the tax administration monthly on the number of services provided, classified by type of services and their price, as well as number of recipients and they to keep the appropriate records. When requested by their business customers in Mexico, non-resident suppliers are required to issue proof of the payment made by these customer to the supplier with explicit and separate reference to the amount of VAT paid (to support these business customers’ claim to input-VAT deduction). In 2021 a measure was introduced that allows tax authorities to temporarily block access to the digital services of the non-resident suppliers that do not comply with some of their VAT obligations. The application of this measure provides prior right to hearing of the affected supplier.

United Kingdom. Foreign suppliers of B2C telecommunication, electronic and broadcasting (TBE) services are liable to account, collect and remit the VAT on those supplies in the UK where the customer is resident in the UK. In addition, where digital services are supplied via an online platform or marketplace, that platform or marketplace is deemed to have received and remade the supply in its own name. Other B2B supplies are subject to a reverse charge mechanism when the customer is a UK business.

European Union. Under the VAT Mini-One-Stop-Shop scheme (MOSS) non-EU suppliers (since 2003) and EU suppliers (since 2015) of cross-border B2C telecommunication, broadcasting and electronic (TBE) services were liable to account, collect and remit the VAT due on those supplies in the Member State where the consumer has its residence under a simplified VAT registration and collection regime. From 1 July 2021, this regime has been extended to all cross-border B2C supplies of services where the place of taxation is within the EU. Under this One Stop Shop scheme (OSS) EU and non-EU businesses that are not established in the Member State of taxation can opt to register and account for the VAT due on those supplies in only one Member State. Whereas EU business have to choose their Member State of establishment, the non-EU business can choose any Member State. This simplification measure avoids the need to register for VAT in all the Member States where the foreign supplier has B2C customers. Digital platforms (“marketplaces”) can be liable to collect, report and remit the VAT due on the B2C supplies they take part in. These platforms can have the possibility to register and account for VAT through the OSS.

Annex Table 2.A.9. VAT Treatment of Imports of Low-Value Goods

Country	VAT treatment1	Exemption threshold
		Currency	In local currency2	In USD3
Australia*	T	-	-	-
Austria	T	-	-	-
Belgium4	T	-	-	-
Canada*	E	CAD	20 (40)	16 (32)
Chile	E	USD	-	30
Colombia	E	USD	-	200
Costa Rica	E	USD	-	500
Czech Republic4	T	-	-	-
Denmark4	T	-	-	-
Estonia4	T	-	-	-
Finland4	T	-	-	-
France4*	T	-	-	-
Germany4	T	-	-	-
Greece4	T	-	-	-
Hungary4	T		-	-
Iceland*	E	ISK	2 000	13
Ireland4	T	-	-	-
Israel*	E	USD	-	75
Italy4	T	-	-	-
Japan	E	JPY	10 000	100
Korea*	E	USD	-	150
Latvia4	T	-	-	-
Lithuania4	T	-	-	-
Luxembourg4	T	-	-	-
Mexico*	E	USD	-	50
Netherlands4	T	-	-
New Zealand*	T	-	-
Norway*	T	-	-	-
Poland4*	T	-	-	-
Portugal4	T	-	-	-
Slovak Republic4	T	-	-	-
Slovenia4	T	-	-	-
Spain4	T	-	-	-
Sweden4*	T	-	-	-
Switzerland*	E	CHF	65	59
Türkiye	T	-	-	-
United Kingdom*	T	-	-	-

Notes:

* See country notes.

This table shows VAT collection thresholds below which the importation of goods dispatched from abroad to a customer in the given jurisdiction is exempt from VAT (VAT low-value import relief threshold). It does not cover other import scenarios such as imports of goods exchanged between private individuals or imports of goods in the personal luggage of travellers. It is recognised that imports of excisable goods are generally excluded from these VAT low-value import reliefs.

1. VAT treatment: this column shows situations where the importation of such goods is free of VAT (E) or taxed (T).

2. For Chile, Colombia, Costa Rica, Israel, Korea and Mexico, the threshold is not provided in local currency in national legislation but in USD. Except stated otherwise in the country notes, the amount reflects the intrinsic value of the goods (excluding freight, insurance and other costs and taxes).

3. Amounts are converted into USD at Purchase Parity Rates (PPPs) for GDP 2021.

4. Member States of the EU are bound by EU VAT and Customs legislation.

Source: National delegates. Position as at 1 January 2022.

Annex Box 2.A.5. Country notes to Annex Table 2.A.9. VAT Treatment of Imports of Low-Value Goods

Australia. From 1 July 2018, foreign suppliers shipping low-value goods (i.e. with a customs value of AUD 1 000 or less) to consumers in Australia are required to register, collect and remit the GST on those supplies if the volume of such supplies (and any other taxable supplies) exceeds the GST registration threshold of AUD 75 000 per annum. Digital platforms (Electronic Distribution Platforms) and “redeliverers” are liable to collect GST on such supplies made through them. Foreign suppliers/ Electronic Distribution Platforms/redeliverers can register for GST under the simplified “pay-only” registration procedure. B2B supplies follow the same principles as for services and intangibles. The GST is collected by the customs authorities at the border for goods where they are also subject to excise duties (i.e. alcohol and tobacco products) and for goods, including a consignment of goods, with a customs value exceeding AUD 1 000.

Canada. From July 1, 2020, the threshold is CAD 40 for goods that are imported by courier from Mexico or the United States. The threshold is CAD 20 for all other courier and postal importations.

Iceland. This exemption threshold applies only to the importation of goods via "express deliveries". An exemption threshold of ISK 1 500 applies to imports of goods by importers registered for VAT purposes in Iceland.

Israel. The threshold is given in USD in national legislation. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities.

Korea. The threshold is given in USD in national legislation. Postal parcels and express consignments are exempt if their value does not exceed USD 150 and the quantity is such that the customs authorities recognise the goods as for personal use.

Mexico. The threshold is given in USD in national legislation. The threshold of USD 50 applies to imports by the postal service or by courier services.

New Zealand. From 1 December 2019, foreign suppliers shipping low-value goods (i.e. with a value of NZD 1 000 or less) to consumers in New Zealand are required to register, collect and remit the GST on those supplies if the volume of such supplies (and any other taxable supplies) exceeds the GST registration threshold of NZD 60 000 per annum. Digital platforms (online marketplaces and platforms) are liable to collect the GST on such supplies made through them. Foreign suppliers/online marketplaces and platforms can register for GST under the simplified “pay-only” registration scheme. For goods whose value exceeds NZD 1 000 the GST is collected by the customs authorities at the border.

Norway. From 1 April 2020, foreign suppliers of low-value goods (i.e. goods with a value below NOK 3 000) that are imported and delivered to consumers in Norway are required to register, collect and remit the VAT on those supplies in Norway, if the volume of such supplies exceeds the VAT registration threshold of NOK 50 000 per annum (the same threshold as for locally established traders). Foreign suppliers whose volume of relevant supplies exceeds the threshold must register and account for VAT from the first supply. Digital platforms (Marketplaces) are liable for collecting the VAT on such supplies made through them. Foreign suppliers/online marketplaces can register under a simplified “pay only” registration scheme (VOEC). Imports of goods with a value at or above NOK 3 000, foodstuffs, restricted goods, and goods subject to excise duties are outside the scope of the VOEC. These goods will be subject to collection of VAT at the border, along with applicable other duties (such as excise and customs duties).

Switzerland. The importation of goods in Switzerland is exempt from VAT when the amount of the VAT due on such imports is CHF 5 or less per declaration. For ease of comparison, the equivalent threshold under the standard VAT rate is shown in the table above, i.e. CHF 65 x 7.7% VAT = CHF 5. For goods taxed under the reduced rate of 2.5 % (e.g. books) the CHF 5 threshold is reached only for supplies of CHF 200 or above. However, anyone shipping such goods to consumers in Switzerland for an annual value of CHF 100 000 is considered as making taxable supplies of goods in Switzerland and must register, collect and remit the VAT on those supplies.

United Kingdom. From 1 January 2021, the import VAT exemption for goods valued at GBP 15 or less was removed and these goods are now subject to VAT. How VAT is collected on imported goods depends on the value and nature of the consignment. Supplies of goods imported in low value consignments (valued at GBP 135 or less) are now subject to VAT at the point of sale instead of collection at the border.

• A seller, or an online marketplace where it facilitates the supply, must be registered for VAT, charge VAT at the point of sale, and account for it through their VAT return.

• Where a supply is to a VAT registered business, the seller or online marketplace should not charge VAT, and instead, the customer can account for the VAT through their VAT return.

• Consignments valued above GBP 135, as well as consignments of any value containing excise goods or non-commercial goods (e.g. gifts), remain subject to import VAT collection at the border.

European Union. From 1 July 2021, the VAT exemption threshold for the importation of low-value goods was removed and these became subject to VAT. The VAT on supplies of low-value goods (i.e. goods with value below EUR 150) that are imported and delivered to consumers in the EU can be collected in two ways by the supplier or the digital platform (if the supply is facilitated through a digital platform – electronic interface).

• The supplier/digital platform can register, collect and remit VAT under a simplified “pay only” registration scheme (The Import One-Stop Shop - IOSS) in the Member State of its choice (this simplification measure avoids the need to register for VAT in all the Member States where low-value goods are delivered to customers). However, only suppliers/digital platforms established within the EU may register directly under that scheme whereas non-EU established suppliers/digital platforms must register through an intermediary established in the EU. As an exception to this rule, suppliers/digital platforms established in a country with which the EU has concluded an agreement on mutual assistance and who are carrying out distance sales of goods from that third country can also register directly. Under this scheme, the supplier/digital platform will charge the VAT directly to the customer at the time of sale and remit it to the tax authorities. No VAT will be collected at the border. There is no registration threshold and suppliers/digital platforms using the IOSS must register and account for VAT from the first supply.

• The supplier/digital platform can opt for the standard customs procedure and elect to have the customs declarant (usually the postal operator, courier firm, or a customs agent) collect the import VAT (with possibly clearance fees) from the final consumer at the time of the delivery.

Annex Table 2.A.10. Availability of VAT Relief or Refund to Non-Resident Businesses

Country	Availability of VAT relief/refund mechanism to foreign businesses	Approach2	Reciprocity requirement	Availability of VAT deduction under the simplified registration and compliance regime1
Australia	Yes	Refund available for registered businesses other than non-resident businesses that register through the simplified “pay-only” registration system.	No	No (“pay-only” registration)
Austria	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive. No VAT refund for the purchase of fuel.	No	No (“pay-only” registration)
Belgium	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
Canada	Yes	Relief through zero-rating where appropriate. If not available, the following forms of relief may be available (facts and circumstances test): No VAT to be charged to a foreign business on an otherwise taxable supply of goods in Canada provided the supplier to the foreign business receives a “drop shipment certificate” from a VAT registered person who is physically receiving the goods; Allowing a foreign business to “flow through” VAT paid on the importation of goods into Canada or paid to a VAT registered person, to its VAT registered customer or supplier, who will in turn recover that VAT through its VAT return.	No	No
Chile	No	N/A	N/A	No (“pay-only” registration)
Colombia	No	N/A	N/A	No (“pay-only” registration)
Costa Rica4	No	N/A	N/A	No (“pay-only” registration)
Czech Republic	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds are available only to businesses established in the EU and in countries that refund VAT to Czech businesses.	No (“pay-only” registration)
Denmark	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
Estonia	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds are available only to businesses established in the EU and countries that refund VAT to Estonian businesses.	No (“pay-only” registration)
Finland	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
France	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
Germany	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU, and in countries with which Germany has signed a reciprocity agreement.	No (“pay-only” registration)
Greece	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC (electronic-based system); Businesses established outside the EU: refunds made under the terms of the EU 13th Directive (paper-based system).	Yes refunds available only to businesses established in the EU, Norway, Switzerland and the United Kingdom.	No (“pay-only” registration)
Hungary	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to business established in the EU, Liechtenstein, Switzerland and Norway. Serbia and Türkiye (for Türkiye, only in respect of supply of fuel, road toll service, supplies in connection with the maintenance of vehicles acquired to carry out transportation of goods or persons; and supplies acquired to participate as an exhibitor on exhibitions, expositions and fairs). UK (in accordance with the Brexit Protocol)	No (“pay-only” registration)
Iceland	Yes	Refund available through direct refund mechanism (without registration or tax representative).	No	N/A
Ireland	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration).
Israel	No	N/A	N/A	N/A
Italy	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU, Israel, Norway and Switzerland.	No (“pay-only” registration)
Japan	Yes	A non-established business must appoint a resident tax representative and elect to be treated as a taxable business.	No	No
Korea	Yes	Refund available through direct refund mechanism (without registration or tax representative).	Yes: refunds available only to foreign businesses on a reciprocal basis.	No
Latvia	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU and in countries that refund VAT to Latvian businesses.	No (“pay-only” registration)
Lithuania	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds are available only to businesses established in the EU and in countries that refund VAT to Lithuanian businesses. Refunds are available to businesses established in OECD member countries that do not operate a VAT or a similar tax.	No (“pay-only” registration)²
Luxembourg	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
Mexico	No	N/A	N/A	No (“pay-only” registration)
Netherlands	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	No	No (“pay-only” registration)
New Zealand	Yes	Most supplies to non-residents are zero-rated. However, non-resident businesses that do not make taxable supplies in New Zealand may register for GST to recover GST incurred in New Zealand under several conditions: (1) the non-resident business must be registered for GST or VAT in its own country; (2) the GST refund resulting from the first GST return must be more than NZD 500; (3) the GST input tax credits only arise when the non-resident has paid for the expenditure; (4) The non-resident cannot form a New Zealand GST group with New Zealand resident entities unless the non-resident is registered for GST under the ordinary rules; (5) the non-resident must not be making supplies of services that are likely to be received by a person in New Zealand who is not registered for GST; (6) the tax authority will not be legally obliged to refund the GST until 90 days after the GST return has been lodged.	No	No (“pay-only” registration). Foreign suppliers may elect to register under the full registration regime allowing them to claim GST back on New Zealand-based costs.
Norway	Yes	Refund available through direct refund mechanism (without registration or tax representative).	No	No (“pay-only” registration)
Poland	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU and countries that refund VAT to Polish businesses.	No (“pay-only” registration)
Portugal	Yes	Refund available through direct refund mechanism: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive through the appointment of a VAT representative in Portugal.	Yes: refunds available only to businesses established in the EU and countries that refund VAT to Portuguese businesses.	No (“pay-only” registration).
Slovak Republic	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU and countries that refund VAT to Slovak businesses.	No (“pay-only” registration)
Slovenia	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU and countries that refund VAT to Slovenian businesses.	No (“pay-only” registration)
Spain3	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive.	Yes: refunds available only to businesses established in the EU, Canada, Israel, Japan, Monaco, Norway and Switzerland through appointment of a VAT representative in Spain.	No (“pay-only” registration)
Sweden	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration: Businesses established in the EU: refunds made under the terms of EU Directive 2008/9/EC; Businesses established outside the EU: refunds made under the terms of the EU 13th Directive. Non-established businesses may claim relief of Swedish VAT to the same extent as VAT-registered businesses (effective as of 1 January 2010).	No	No (“pay-only” registration)
Switzerland	Yes	Switzerland refunds VAT incurred by businesses that are neither established nor registered for VAT in Switzerland or Liechtenstein and that have not made any supplies in Switzerland or Liechtenstein (except for supplies that are exempt from the tax, services whose place of supply is the place of the recipient or supplies of electricity in cables, gas via the natural gas distribution network and district heating to persons liable to the tax on Swiss territory).	Yes: refunds are made on the condition of reciprocity.	N/A
Türkiye	Yes	Refund available through direct refund mechanism (without registration or tax representative) for certain transactions.	Yes (partially dependent on reciprocity).	Yes
United Kingdom	Yes	Refund available through direct refund mechanism (without registration or tax representative) or direct VAT registration:	No

Notes:

The VAT relief or refund mechanisms presented in this table do not include the mechanisms associated with the exports of goods or tourist schemes.

1. The absence of input VAT relief for foreign suppliers under a country’s simplified registration and compliance regime generally does not prevent such foreign suppliers from exercising the right to obtain a relief of this input VAT under the standard procedure. For example, in the EU, non-established suppliers registered under the MOSS can still apply for VAT refunds under the terms of the EU 13^th Directive.

2. The terms "refund available" in this table does not mean that refunds are made automatically. They may be subject to (manual) verification processes.

3. Spain: a direct VAT relief is provided on the purchase of moulds, designs and equipment for the manufacturing in Spain of goods to be dispatched out of the EU to a non-established business and for any service acquired for the assistance of commercial or professional fairs, expositions or congresses organised in Spain.

4. Costa Rica. A direct refund mechanism is in process of implementation. The scope of this mechanism will be restricted to specific services listed in legislation (access to events, hotels, restaurant and transport connected with the attendance to trade fairs and commercial exhibitions for commercial or professional purposes held within the national territory.

Source: national delegations; position as at 1 January 2022.

Annex Table 2.A.11. Digital Reporting Requirements

Country	Electronic invoicing2	Electronic transaction reporting
		Mandatory electronic transaction reporting	Reporting format	Reporting provision	Reporting period/frequency
Australia*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed (with accredited service providers)	Transaction data: yes (1 January 2000)	No specific format is required	On request (based on risk assessment)	-
		Electronic cash register: allowed (1 January 2000)	No specific format is required	On request	-
Austria*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed (mandatory for B2G4 supplies)	Transaction data: yes (1 January 2000)	No specific format is required SAF-T3 is allowed since 2009	Systematic (periodically) and on request	Annual
		Electronic cash register: yes – offline (1 April 2017)	No specific format is required	On request	-
Belgium*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: no	-	-	-
		Electronic cash register: yes (1 July 2016)	Certified software	On request	-
Canada	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: no	-	-	-
		Electronic cash register: no	-	-	-
Chile*	Paper invoices: not allowed Digitised invoices: allowed for B2C E-invoices: mandatory for B2B, B2C and B2G supplies under XML format	Transaction data: yes (January 2003)	XML format determined by the tax authority	Systematic Clearance model	At the time the invoice is emitted (real time invoice reporting)
		Electronic cash register: no

 

Country	Electronic invoicing2	Electronic transaction reporting
		Mandatory electronic transaction reporting	Reporting format	Reporting provision	Reporting period/frequency
Colombia*	Paper invoices: not allowed unless there are technological problems that render impossible the transmission of e-invoices. Digitised invoices: not allowed for B2B nor B2C E-invoices: mandatory for B2B, B2G and B2C supplies under XML format	Transaction data: yes (January 2017)	XML format determined by the tax authority	Systematic Clearance model	At the time the invoice is emitted (real time invoice reporting)
		Electronic cash register: optional Limited to 5 TVU (190 020 COP) and does not allow to use as VAT credit nor to deduct in the income tax regime (CIT and PIT). (January 2022)	Subject to approval by the tax authorities.
Costa Rica*	Paper invoices: not allowed, except as contingency measure and previously authorized by the Tax Administration. Digitised invoices: not allowed E-invoices: mandatory for B2B, B2G and B2C supplies under XML format.	Transaction data: yes (March 2018)	XML format determined by the tax authority	Systematic Clearance model	At the time the invoice is emitted (real time invoice reporting)
		Electronic cash register
Czech Republic*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed.	Transaction data: yes	Control Statement	Systematic (periodically)	Monthly/quarterly
		Electronic cash register: yes - offline (1 January 2020)	No specific format is required	On request	-
Denmark*	Paper invoices: allowed. Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 March 2015)	No specific format is required	On request	-
		Electronic cash register: no	-	-	-

 

Country	Electronic invoicing2	Electronic transaction reporting
		Mandatory electronic transaction reporting	Reporting format	Reporting provision	Reporting period/frequency
Estonia*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (2014)	X-road XML, CSV	Periodically	At the time the VAT return is lodged
		Electronic cash register: no	-	-	-
Finland	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: no	-	-	-
		Electronic cash register: no	-	-	-
France*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed (mandatory for B2G4 supplies)	Transaction data: yes (1 January 2014)	SAF-T3	On request	-
		Electronic cash register: yes – offline (1 January 2014)	No specific format is required	On request	-
Germany	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2014)	No specific format is required	On request	-
		Electronic cash register: no	-	-	-
Greece*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 October 2021)	Specific format is required	Systematic Clearance model	Data on sales: varies from the time of supply up to the 20th day of the month, and as of 1.1.2023 the 2nd day following the issuance of the invoice. Data on purchases: at the time the VAT return has to be lodged
		Electronic cash register: yes	Specific format is required	Systematic	At the time the VAT return is lodged

 

Country	Electronic invoicing2	Electronic transaction reporting
		Mandatory electronic transaction reporting	Reporting format	Reporting provision	Reporting period/frequency
Hungary*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 July 2018)	No specific format is required	Systematic (real time) Transmission model-	At the time the invoice is emitted (real time invoice reporting)
		Electronic cash register: yes (1 January 2014)
Iceland	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: no	-	-	-
		Electronic cash register: no	-	-	-
Ireland	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2014)	No specific format is required	On request
		Electronic cash register: no	-	-
Israel*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2010)	Specific format required: PCN874	Systematic (periodically) Transmission model	Monthly
		Electronic cash register: yes (1 January 2010)	No specific format is required	Systematic (periodically) Transmission model	Monthly
Italy*	Paper invoices: not allowed Digitised invoices: not allowed Structured E-invoices: mandatory for all transactions (with few exceptions)	Transaction data: yes (1 January 2020)	XML format	Systematic (real time) Clearance model	At the same time the invoice is emitted (real time invoice reporting)
		Transaction data for not domestic transactions: yes (1 January 2019)	XML format	Systematic (periodically) Transmission model	Monthly - By the end of the month following the reference quarter
		Electronic cash register: yes (1 January 2020)	XML format	Systematic (periodically) Transmission model	Daily
Japan	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: no	-	-	-
		Electronic cash register: no	-	-	-
Korea*	Paper invoices: not allowed for B2B transactions Digitised invoices: not allowed for B2B transactions E-invoices: mandatory for B2B transactions	Transaction data: yes (1 January 2011)	Electronic Tax Invoicing format	Systematic (near real time) Clearance model	One day after the invoice is emitted
		Electronic cash register: Yes (1 January 2005)	No specific format is required	Systematic	Daily
Latvia*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (26 0ctober 2011)	No specific format is required	On request	-
		Electronic cash register: yes (1 July 2017)	No specific format is required	On request	-
Lithuania	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 October 2016)	SAF-T3	Systematic Transmission model	Monthly
		Electronic cash register: optional	Certified software	On request
Luxembourg*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes	SAF-T3	On request	-
		Electronic cash register: no	-	-	-

 

Country	Electronic invoicing2	Electronic transaction reporting
		Mandatory electronic transaction reporting	Reporting format	Reporting provision	Reporting period/frequency
Mexico*	Paper invoices: not allowed for B2B and B2G transactions Digitised invoices: not allowed for B2B and B2G transactions E-invoices: mandatory for B2B and B2G transactions	Transaction data: yes (1 January 2015)	XML format	Systematic (automated, periodic and on request) Clearance model	E-invoices: at the same time the invoice is emitted (real time invoice reporting) Transaction data: monthly
		Electronic cash register: no	-	-
Netherlands	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2000)	SAFT3	On request	- -
		Electronic cash register: no	-	-	-
New Zealand	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2000)	No specific format is required	On request	-
		Electronic cash register: no	-	-	-
Norway*	Paper invoices: not allowed for B2B and B2G4 transactions Digitised invoices: not allowed for B2B and B2G transactions E-invoices: mandatory for B2B and B2G4 transactions	Transaction data: yes (1 January 2020)	SAF-T3	On request	-
		Electronic cash register: Yes (1 January 2019)	Software approved by the tax administration	On request	-
Poland*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2018)	SAF-T3	Systematic and on request	Monthly
		Electronic cash register: yes	Certified software	On request	-
Portugal*	Paper invoices: allowed Digitised invoices: allowed E-invoices: mandatory for B2G4 transactions	Invoicing data: yes (1 January 2013)	Web-service format (real time) or Structured file based on SAF-T3/Direct upload on the tax administration (monthly). Mandatory invoice software certification (1 January 2011) SAF-T (accounting and invoicing data) (1 January 2008)	Systematic Transmission model On request for audit purposes	Near real time (until the 12th day following each month)/ Monthly
		Electronic cash register: optional	Certified software		-
Slovak Republic*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 January 2014)	Specific software is required	Systematic (in the same time as VAT return)	Monthly/quarterly
		Electronic cash register: yes (1 January 2012)	Certified software	Systematic	In real time
Slovenia	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes	SAF-T3	On request	-
		Electronic cash register: yes	Certified software	Systematic	In real time
Spain*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes (1 July 2017)	XML	Systematic (near real time) Transmission model	Within four days of issuance of the invoice (near real time)
		Electronic cash register: no
Sweden*	Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed	Transaction data: yes	No specific format is required	On request	- -
		Electronic cash register yes	Certified software	On request

 

Country	Electronic invoicing2		Electronic transaction reporting
			Mandatory electronic transaction reporting		Reporting format		Reporting provision	Reporting period/frequency
Switzerland*		Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed		Transaction data : no		-		-	-
				Electronic cash register: no		-		-	-
Türkiye		Paper invoices: allowed for B2C Digitised invoices: not allowed for B2C E-invoices: mandatory for B2B and B2G supplies under XML format		Transaction data: yes (January 2020)		XML format determined by the tax authority		Systematic (real time) Clearance model	Daily
				Electronic cash register: no		-		-	-
United Kingdom		Paper invoices: allowed Digitised invoices: allowed E-invoices: allowed		Transaction data: yes		Functional compatible software		On request	-
				Electronic cash register: no		-		-	-

Notes:

1. For the purpose of this table, electronic transaction reporting means the transmission by VAT registered businesses of detailed information under electronic format concerning individual taxable transactions, including accounting information, invoicing information or any other information allowing tax authorities to obtain information on each taxable supply made and/or received by the taxpayer. This does not include the electronic provision of bulk data such as total sales/turnover or deductible amounts e.g. in periodic returns or statements.

2. For the purpose of this table, “electronic invoice” or “e-invoice” refers to automatically exchanged invoice information between accounting systems of parties to a transaction. “Digitised invoice” means a copy of an invoice (e.g. in pdf format) sent by electronic means (e.g. by email) between parties to a transaction.

3. SAF-T stands for Standard Audit File for Tax, a mechanism that was developed by the OECD Forum on Tax Administration (FTA). It involves the use of accounting software to create an electronic file (the SAF-T) containing accounting data. The SAF-T enables the transfer of data from the taxpayer to the tax authorities in a standardised, electronic format. (Guidance for Developers of Business and Accounting Software Concerning Tax Audit Requirements available here http://www.oecd.org/tax/administration/guidancenote-guidancefordevelopersofbusinessandaccountingsoftware concerningtaxauditrequirements.htm). In most cases, a local version of the SAF-T is created to respond to local needs.

4. B2G means supplies made by VAT registered businesses to government or public authorities or agencies.

5. Clearance model: under a clearance model, VAT registered businesses must provide invoicing data to tax authorities and such data must be systematically cleared (validated) by these tax authorities for the invoice to be considered a valid accounting document.

Source: National delegations; position as at 1 January 2022.

Annex Box 2.A.6. Country notes to Annex Table 2.A.11.

Australia. Electronic transaction information may be required from the taxpayer only when a risk assessment of activities reveals a need for further information. This may be simply a copy of invoices (possibly in .pdf format), other substantiating documents, or an electronic spreadsheet of transactions. It is rare for the Australian Tax Administration to access the actual electronic records within the business system.

Austria. Electronic transaction information: from 2000, there is an obligation to provide transaction data on data carriers at the request of tax authorities (in the course of an audit). From 2009 data transmission under the SAF-T format is allowed. As from 1 January 2020, a special reporting obligation applies to platforms, in respect of goods and services of other suppliers facilitated by the platform. Electronic cash registers: the use of electronic cash registers is mandatory for taxpayers with a net annual turnover of EUR 15 000 or more, provided that the cash turnover exceeds EUR 7 500 per year. The applicable annual turnover is of EUR 30 000 for businesses in the following areas: outdoor sales; sales of alpine – mountain ski and refuge hunts; sales in specific kinds of wine taverns (“Buschenschank”); sales in canteens of non-profit organisations. General exemption from the cash register obligation applies to non-profit organisations, charitable and ecclesiastic bodies; self-service automates with single sales of less than EUR 20.

Belgium. Electronic cash registers: the obligation to issue cash receipts delivered by a cash registered system (CRS) is imposed on taxpayers supplying meals or catering services on a regular basis when their annual turnover, excluding VAT, related to the restaurant and catering services, exclusive of the supply of drinks, exceeds EUR 25 000. If the threshold is exceeded, CRS cash receipts must be issued for all their supplies relating to the provision of meals and drinks (supplied during the meal or not), including all sales of food and drinks.

Chile. Electronic invoicing for B2B and B2G is allowed since 2003 on a voluntary basis. It became mandatory since 2014 for large taxpayers, since 2016-2017 for medium taxpayers and since 2018 for small taxpayers. The electronic invoicing scheme requires taxpayers to provide B2B transaction information electronically to tax authorities. In 2017, this requirement was extended to the provision of other accounting data to an electronic record kept by the tax authority. Transaction data must be transmitted to tax authorities in near-real time. Invoicing data must be cleared by tax authorities to be considered as a valid supporting document (incl. for the right to deduct input VAT). Effective from 1 April 2021, an amendment to the VAT Act introduced the obligation to issue B2C invoices electronically. These invoices should be sent through any electronic method (e.g. email) provided that it is accessible to the consumer and the business. Exceptions to the electronic invoicing obligations may apply for taxpayers located in zones where no internet connection or energy supply exist, with prior authorization by the tax authority. Electronic cash registers are not allowed.

Colombia. The obligation to use electronic invoicing and to provide B2B transaction information electronically to tax authorities (DIAN) started in 2019. Transaction data must be transmitted in XML format to tax authorities in real time. Until mid-2019, the reporting model required taxpayers to submit invoices to DIAN within 24 hours for their issuance. Since then, the taxpayer must submit the e-invoice in XML format for prior validation by DIAN. Until this is granted, which is done live, the e-invoice is not considered as a valid accounting document (incl. for the right to deduct input VAT).

Costa Rica. The obligation to use electronic invoicing and to provide B2B transaction information electronically to tax authorities started in 2017. Transaction data must be transmitted in XML format to tax authorities in real time. Invoicing data must be cleared by tax authorities to be considered as a valid accounting document (incl. for the right to deduct input VAT). In this system, the tax administration performs basic validation checks and issues an acceptance confirmation within three hours to the taxpayer. This ensures the document has full tax status, and may be used as evidence for VAT deductions. In the case of a rejection, the supplier must issue a credit note to reissue a corrected invoice. This obligation is imposed on all taxpayers.

Czech Republic. Taxable persons registered for VAT are obliged to submit a “VAT Control Statement” from 1 January 2016 onwards. It contains data from records that taxable persons are already obliged to keep for VAT purposes (incl. invoices). The VAT Control Statement has to be submitted electronically.

Denmark. Legislation has been passed to require taxpayers to use electronic cash registers when they belong to a category considered at risk. The implementation date is still to be decided.

Estonia. Transaction data must be systematically transmitted to the tax authority at the time the VAT return is lodged for all transactions above EUR 1000 per business partner (below the threshold, transactions data can be reported as an aggregate amount). Reporting format: X-road by sending a VAT return directly from the business software; in online self-service environment using formats XML, CSV.

France. Electronic invoicing is not mandatory, except for B2G supplies. However, mandatory electronic invoicing and e-reporting system will be introduced in stages as follows: the obligation to issue invoices in electronic format and the obligation to transmit payment information and data through a platform accredited by the tax administration will enter into effect as of 1 July 2024 for large businesses; as of 1 January 2025 for medium-sized businesses and 1 January 2026 for all businesses. The obligation to accept invoices in electronic format will enter into effect as of 1 July 2024 for all businesses, regardless of their size, as soon as their supplier is obliged to issue invoices in electronic format. Electronic transaction information: taxpayers keeping electronic accounts must provide them in the form of digital files upon request by the tax administration for control purposes (these files should meet specific standards). Electronic cash registers: VAT registered taxpayers making sales to final consumers, which record payments using electronic cash registers must use certified software meeting several technical conditions (inalterability, security, preservation) for tax control purposes. However, the use of electronic cash registers is not mandatory.

Greece. Electronic invoicing is not mandatory. Transaction data: as of 1 October 2021, businesses established in Greece subject to the Greek Accounting Standards and making supplies to other businesses/consumers/government entities are required to submit their transaction data (sales and purchases) to an online platform called myDATA (my Digital Accounting & Tax Application). All entities subject to these provisions must digitally transmit to myDATA: (1) a summary of issued and received sales documents (invoices, retail receipts etc.); (2) the characterisation of the transactions covered by these sales documents classifying them to revenue and expenses categories; (3) data of the additional adjustment accounting entries (e.g. payroll, depreciation) that form their accounting/tax base for the export of the accounting/tax result of each fiscal year. Such data can be transmitted through: an interoperable accounting/commercial software; a special Data Entry Form developed by IAPR; connected Electronic Tax Register Machines (ETRMs) for retail sale transactions (Online Cash Registers, OCR); or Electronic Invoicing through Licensed Providers or through an application named “timologio” developed by IAPR for issuance and transmission of accounting documents (invoices, retail receipts). These submissions are different from VAT returns but allow tax authorities to cross-reference the VAT return and myDATA information. If the information does not match up, businesses have two months to correct or justify any discrepancies. If they fail to do so, they can be subject to an audit. Electronic cash registers (“tax machines”) are mandatory for retail sales, except for business categories listed by the tax administration regulation (e.g. solicitors, accountants, farmers, etc.).

Hungary. Invoicing information: invoices emitted by an invoicing programme must be transmitted to the tax authorities at the same time the invoice is emitted by the taxpayer (real time reporting). Information on ‘paper invoices’ must be provided to the tax authorities within one day (if the value of VAT figuring in the invoice exceeds HUF 500 000) or within 4 days (in other cases). The customer who wishes to deduct VAT has certain reporting obligations too. Further reporting obligations apply for the modification or cancellation of invoices as well. These reporting rules concerning emitted invoices apply to invoices which fall under the Hungarian invoicing rules according to EU-rules, B2B/B2C supplies and exempt Intra-Community supplies of goods included.

Israel. Transaction data transmission: taxpayers (“licenced dealers”) whose turnover exceeds ILS 2 500 000 or that are obliged to implement the double-entry bookkeeping system; or those whose turnover exceed ILS 1 500 000 and are required by law to prepare balance sheets and to appoint an auditor; must transmit invoicing information every month (i.e. by the 23rd of the following month) to the tax administration under a prescribed format (PCN874). Certified electronic cash registers: the obligation to use certified electronic cash registers is imposed on/available to certain taxpayers depending on their activity and turnover. For example, all retailers must use certified electronic cash registers (no threshold applies but under ILS 350 000 annual turnover, the retailer can choose to use sales book instead). Wholesalers with turnover up to ILS 10 100 000 can use certified electronic cash registers as an option for cash transaction up to ILS 710 instead of invoices. Transportation service providers can use certified electronic cash registers (no threshold). For other services, electronic cash registers can be used (no threshold); if a transaction is recorded with a receipt, the receipt replaces the electronic cash registers.

Italy. Transaction data transmission: all VAT-registered businesses established in Italy are obliged to accept and issue invoices in electronic format through the Italian Revenue Agency’s e-invoicing platform, Sistema di Interscambio (SdI) for the operations that take place in the Italian territory. The invoice file can also be submitted by the customer or a third party on behalf of the supplier. The invoice must be issued at the latest 12 days after the execution of the supply. From 1 July 2022, businesses subject to the exemption under the small enterprises regime with more than EUR 25 000 in annual turnover are obliged to accept and issue invoices in electronic format. From 1 January 2024, this obligation will be extended to all the remaining businesses subject to the exemption under the small enterprises regime, regardless of their turnover. Businesses established in Italy providing or purchasing supplies to/from businesses established abroad must provide the Revenue Agency with transaction data on such transactions by the end of the month following the reference quarter. Starting from 1 July 2022, these businesses must transmit data to the Revenue Agency at the same time the invoice is emitted (real time invoice reporting) for active transactions or by the fifteenth day of the month following that of receipt of the document proving the transaction or execution of the transaction for passive transactions. For B2C supplies (i.e. businesses engaged in the retail trade and similar activities), the issuance of the invoice is not mandatory. However, if the customer requests an invoice no later than at the time of the supply, it should be issued in electronic format. Electronic cash registers: from 1 January 2020, all retailers are subject to the obligation to transmit daily their sales records electronically to the Revenue Agency through electronic cash registers or through a web application offered free of charge by the Revenue Agency. Retailers must also issue a receipt to the customer but this document has only commercial value: the fiscal certification of the supply is given by the storage of data in the cash register and the daily transmission of data to the Revenue Agency.

Korea. Transaction data transmission: all business operators and individual businesses whose total value of supplies of goods and services for the immediately preceding taxable year is at least KRW 300 million are required to issue electronic invoices under a prescribed format for all B2B supplies. The tax administration must have a direct automated access to invoicing information (only) 1 day after the invoice is emitted through the Electronic Tax Invoicing System. The invoicing information must be available to the tax administration for clearance before it can be considered as a valid accounting document, including as supporting evidence for the deduction of input VAT. Electronic cash receipts: individual businesses that supply goods or services mainly to final consumers must issue electronic cash receipts and transaction data must be transmitted daily to the tax authority.

Latvia. Transaction data transmission: if a taxpayer maintains accounting registers in electronic form, it must, at the request of the tax administration, provide access to any information related to its economic activities, stored in electronic form. The accounting computer programme shall ensure the recording of accounting data in such formats: MS Excel, dBase/FoxPro, Text Report files, Flat files, Excel, Access, PDF, Adobe PDF, XML or ODBC data sources. Electronic cash receipts: in street trading venues, taxpayers are required to use a cash register stipulated by law if the combined value of its supplies of goods and services does reach EUR 150 000 within the period of previous 12 months. For passenger transport activities, taxpayers are required to use cash register systems stipulated by law if the combined value of transactions performed in a particular structural unit or passenger transport vehicle exceeds EUR 1 500 000 during the period of previous 12 months. The use a cash register stipulated by law is mandatory for taxpayers registered with the Value Added Tax Payers Register of the State Revenue Service, petrol stations and taxi firms.

Luxembourg. The transaction information transmission obligation was implemented for the fiscal year 2011. The requirement to make transaction information available to the tax administration under the SAF-T format is not imposed on taxpayers who are not liable to the plan comptable normalisé (standardised chart account); or who benefit from the simplified regime; or whose turnover is below EUR 112 000; or having no reasonable volume of booking transactions (under +/- 500).

Mexico. Electronic invoicing is mandatory since 1 January 2014. The transmission of transaction data to the tax authority is mandatory since 1 January 2015. Invoicing information must be transmitted to the tax authorities at the time the invoice is emitted (real time transmission) through a government-approved e-invoicing company (PAC) to validate and stamp invoices as they are issued. Invoices must be validated through the system to be considered as a valid accounting document (incl. for the right to deduct input VAT). The PAC also provides secure storage and retrievable for invoices. This obligation applies to all taxpayers and covers the domestic supplies of goods and services for both B2B and B2C transactions. Periodic transmission of transaction information is also imposed to all taxpayers. Federative entities, municipalities, trade unions and entities of the parastatal public administration; certain small taxpayers and non-profit legal persons are relieved from that obligation.

Norway. Transaction data transmission: the Norwegian Bookkeeping Regulation includes a requirement to disclose accounting data in the SAF-T format for all businesses with annual turnover of NOK 5 million or more. This requirement also applies to businesses with an annual turnover of less than NOK 5 million if they have bookkeeping information available electronically. The companies subject to bookkeeping obligations are only obliged to submit accounting information in SAF-T format on request by the tax authorities. Electronic Cash registers: from 1 January 2017, cash register systems must meet the requirements laid down in the Norwegian Cash Register Systems Act and regulations. Suppliers must declare the systems to be in compliance with the new rules. Companies subject to a bookkeeping obligation must start using new cash register systems from 1 January 2019.

Poland. E-invoicing: since the 1 January 2022, e-invoices are allowed but not obligatory. Transaction data provision: taxable persons must provide transaction data to the tax authorities under the SAF-T format on a monthly basis for JPK_V7M and JPK_V7K; other JPKs (SAT-Ts) are submitted upon request and may cover periods other than one month. The obligation to report transactions was introduced in stages: on 1 July 2016 for large entrepreneurs, on 1 January 2017 for medium-sized and on 1 January 2018 for micro-entrepreneurs. Taxable persons carrying out only supplies exempt from VAT or those benefiting from the VAT exemption for the small enterprises whose annual turnover does not exceed PLN 200 000 (the registration threshold), are exempt from this obligation. The tax authority can also obtain electronic transaction information on request from taxpayers who keep accounting books using computer programs. This obligation also applies to stock movement, invoicing and bank statement programs. As of 1 October 2020 the SAF-T contains new fields to include VAT return data previously submitted in different separate files. Reporting format: Poland has applied its own solutions (JPK_V7M and JPK_V7K) as regards the SAF-T schema. Electronic cash registers: taxable persons whose annual turnover on B2C supplies, exclusive of VAT, does not in the current tax year exceed PLN 20 000 nor in the course of the preceding tax year are exempt from the obligation to use certified electronic cash registers (the exemption does not apply to certain categories of goods /services). Are also exempt, certain categories of supplies such as when an invoice is emitted and/or the payment is made by bank transfer. Online cash registers have been gradually introduced for industries recognised as particularly vulnerable to fraud and non-compliance: for fuel suppliers, car repair services as of 1 January 2020; restaurants and catering services, supplies of coal, short-term accommodation services as of 1 January 2021; hair and beauty salons, construction services, private medical practice, legal services, fitness clubs and gyms as of 1 July 2021. Cash registers in the form of software (the so called virtual cash registers) are a type of online cash registers not requiring hardware equipment or any external devices. They are available for taxpayers conducting activity in specified sectors (e.g. transportation).

Portugal. Transaction data transmission: taxpayers with a permanent establishment in Portugal providing supplies subject to VAT must systematically (at the latest 12 days after the end of each month) transmit invoicing data to the tax administration. This can be done in real time (via web-service) or on a monthly basis through a structured file based on the SAF-T format or by filing it directly in the Tax Authority Web portal. The tax administration can request a SAF-T file for audit purposes, which includes accounting and invoicing data. Taxpayers with a turnover above EUR 50 000 during the previous taxation period are required to use, exclusively, computer invoicing programs previously certified by the Tax and Customs Authority (AT). Common Simplified Report (IES): accounting and financial reporting information to different government bodies is provided through one single common declaration. Electronic cash registers: the use of certified ECR it’s not mandatory but given the obligation to issue an invoice for any transaction and the obligation for taxpayers to use certified invoicing programs, most taxpayers use certified invoicing software instead of electronic cash registers.

Slovak Republic. Transaction data provision: all taxable persons registered for VAT purposes in the Slovak Republic are obliged to submit a special VAT Control Statement, together with their VAT returns to the Financial Administration (FA). VAT listings are submitted separately and are not dependant on the VAT return. Some crosschecking between VAT listings and VAT returns are built into the analytical system. Electronic cash registers: the use of certified cash registers is mandatory for all suppliers that receive payments in cash or by other payment methods replacing cash at the point of sale and those providing sole services listed in the law. Data from these electronic cash registers must be transmitted to the tax authorities in real time.

Spain. Transaction data provision: taxpayers registered in the monthly VAT refund register, those whose annual turnover exceed EUR 6 million and company groups for VAT purposes are required to provide the tax administration with invoicing data in XML format within four calendar days after the invoice is issued or received (Immediate Supply of Information – SII). Any other taxpayer can, on a voluntary basis, also provide the tax administration with invoicing data in the same format and within the same period. Information on investment goods should also be provided within the submission deadline of the last settlement period of the year.

Sweden. Electronic cash registers: the use of certified electronic cash registers is mandatory for taxpayers above the annual turnover threshold of SEK 182 000. It is not imposed on certain taxpayers such as taxi drivers and sales from vending machines. Taxpayers can apply for an exemption of the obligation to use certified electronic cash registers.

Switzerland. Transaction data provision: the tax administration cannot require a registered VAT taxpayer to provide invoicing data in electronic format. The taxpayer is allowed to provide only the paper invoices. Electronic cash registers: where the taxpayer opts for an electronic cash register, data on individual transactions must be transmitted to the tax administration on request or during an audit.

Türkiye. From 1 January 2020, paper invoices are no longer legally valid. All invoices must be sent under electronic format via the e-archive invoice system. Every time an electronic invoice is issued, the recipient receives a notification by email. All businesses must file a daily statement with a summary list with all the e-archive invoice and send it to the tax administration.

United Kingdom. Under the Making Tax Digital initiative, VAT registered businesses with taxable turnover above the VAT registration threshold need to keep digital records and submit VAT Returns to HMRC using functional compatible software.

Annex Table 2.A.12. Application of Domestic Reverse Charge and Split Payment Mechanisms

Country	Domestic reverse charge system	Domestic split payment mechanism
Australia	A mandatory reverse charge applies to supplies between GST registered businesses of precious metals.	Recipients of new residential premises are required to remit GST directly to the tax authorities. This payment is reconciled against GST amounts reported by the supplier in respect of these supplies.
Austria	Supply of laptops, tablets, PCs, game consoles, mobile phones and integrated circuit devices if the amount of the invoice is at least EUR 5 000; Supply of gas and electric energy to taxable dealers; Supply of gas and electric energy certificates; Supply of CO2 emission allowances; Supply of certain metals and of taxable investment gold; Supply of scrap and industrial and non-industrial waste and recyclable waste; Construction services if the recipient is acting as general contractor or if he usually is rendering construction services; Supplies of staff engaged in the construction sector; Supply of goods provided as security by a VAT taxable person to another person in execution of that security; Supply of goods following the cession of the reservation of ownership to an assignee and the exercising of this right by the assignee; Supply of immovable property sold by the judgment debtor in a compulsory sale procedure to another person.
Belgium	Some supplies of investment gold and of gold products of a purity of at least 325 thousandths; Supply of work on immovable property under several conditions; Supplies of staff engaged in the construction sector; Supply of CO2 emissions allowances.
Canada	Certain purchasers of real property are required to self-assess (e.g. when the supplier is a non-resident; or when the purchaser is registered for GST/HST and, if he is an individual, the property is not a residential complex); Self-assessment is generally required with respect to supplies of carbon emission allowances; In certain circumstances, persons may be required to self-assess the provincial part of the HST when certain property or services are moved from one province to another.
Chile	Supplies of rice, construction works, waste, marine species, livestock, vegetables, wood, wild products, wheat and berries. Certain (large) taxpayers are required to reverse-charge the VAT in B2B supplies from businesses included by the tax administration in a special list because of repeated tax compliance breaches.
Colombia	-	Supplies of goods and services made to: (i) public authorities or government bodies; (ii) public owned companies (more than 50% publicly owned); and (iii) companies listed as Big Contributors or VAT withholding agents by the Colombian Tax Authority. Purchase of goods or services made to taxpayers under the SIMPLE tax regime.
Costa Rica	-	Mandatory VAT withholding through national Payment Service Providers (PSP). VAT withheld varies from 0% up to 6% of the transaction value and according to the type of business. PSP entities remit to the Tax Administration the withheld amounts on a daily basis. An informative return must be submitted on a monthly basis with the details of the withholdings and the relevant taxpayers. Withholdings are considered as an advanced payment of the VAT due by non-resident suppliers.
Czech Republic	Supply of taxable investment gold and gold material of purity equal to or greater than 333 thousandths; Supply of designated categories of scrap and waste; Supply of CO2 emission allowances; Supply of construction and assembly services provided between taxable persons registered for Czech VAT; Supply of mobile phones, integrated circuit devices, notebooks, tablets and videogame consoles; Supply of certain metals and basic products from metals; Supply of cereals and industrial crops, including oil seeds and sugar beet; Supply of immovable property under the option for taxation; Supply of gas and electric energy to taxable dealers; Supply of gas and electric energy certificates; Supply of goods following the cession of a reservation of ownership to an assignee and the exercising of this right by the assignee; Supply of immovable property sold by a judgment debtor in a compulsory sale procedure; Supply of staff engaged in construction and assembly services; Supply of certain telecommunication services.	A special method for securing the payment of VAT can be used by customers of taxable supplies that wish to avoid joint and several liability for the supplier’s unpaid taxes. Similarly to the split payment mechanism, the customer then pays the VAT due directly to the account of the supplier's tax office.
Denmark	Supply of CO2 emission allowances; Supply of scrap metals; Supply of investment gold; Supply of mobile phones, integrated circuit devices, games consoles, tablets PCs and laptops.
Estonia	Supply of immovable property and investment gold, where the supplier has opted for taxation; Supply of gold material, including semi-finished gold products (purity of at least 325 thousandths); Supply of scrap metal and precious metals.
Finland	Supply of taxable investment gold as well as gold material and semi-manufactured gold products of purity equal to or greater than 325 thousandths; Supply of CO2 emission allowances; Supply of scrap metal and waste; Construction services, including supply of staff engaged in the construction sector.
France	Supply of CO2 emission allowances; Supply of used materials, scrap and waste; Supply of investment gold and gold products of a purity of at least 325 thousandths; Construction services (limited to certain services provided on a building when performed by a subcontractor on behalf of a taxable person); Supply of gas and electric energy to taxable dealers; Supply of certain telecommunication services. Supply of certificates/guarantees of origin of electricity from renewable energy sources; Supply of certificate of performance guarantee of the public power transport system operator. Supply of certificates/guarantees of origin of gas from renewable energy sources.
Germany	Supplies of pledged assets by the guarantor to the recipient of the security outside the framework of judicial liquidation; Supplies covered by the Real Property Transfer Tax Law (in particular transfers of real estate); If the customer is an entrepreneur: supplies of work or other services serving the construction, repair, maintenance, alteration or removal of structures (except for planning, engineering and supervision) and cleaning of buildings when the customer himself supplies such services; Supply of gold (unwrought or semi-finished of a purity of at least 325 thousandths); Supply of CO2 emissions allowances; Supply of industrial scrap, ferrous and non-ferrous waste and other waste; Supply of mobile devices, integrated circuit devices, game consoles and tablet PC if the transaction value is or exceeds EUR 5 000; Supply of electricity (generally applicable only if supplier and recipient are both treated as resellers) and supply of gas (generally applicable only if the recipient is to be treated as reseller); Transfer of gas and electricity certificates; Supply of precious metals as well as certain ignoble metals (e.g. copper, nickel, aluminium, lead, zinc), unwrought or semi-manufactured, if the transaction value is or exceeds EUR 5 000.
Greece	Construction work on immovable property assigned to contractors of public works by public authorities (that are not necessarily public law entities), when these public authorities are owners of these works and are taxable persons with the right to input VAT deduction. Major projects as defined by EU Regulations are exempt from the reverse charge system. Provided the supply is intended for recycling, the following supplies of recyclable waste: Supply of ferrous and non-ferrous waste metals, scrap(clippings) and other used materials Supply of semi-finished products made of ferrous and non-ferrous metals, Supply of residues and other recyclable materials consisting of ferrous and non-ferrous metals, alloys, slag, scales or ash and industrial residues containing metals or metal alloys; Supply of scrapings and scrap (clippings), waste and used recyclable material consisting of glass fragments, glass, paper, cardboard, rags, bone, leather (natural or artificial), diphtheria, raw hides and skins, tendons and sinews, twine, rope and head rope , cables, rubber and plastic materials; Supply of scrap (clippings) and waste from the working of base materials Supply of the aforementioned materials after cleaning, polishing, selection, cutting, fragmenting and pressing; Supply of greenhouse gas emissions allowances according to EU Directive 2003/87/EC; Supply of mobile phones, videogame consoles, tablets and laptops provided the acquirer is a taxable person entitled to input tax deduction (that is if registered under the normal VAT scheme).
Hungary	Supply of construction works regarded as a supply of goods; Construction or other alteration or repair activity qualifying as service, directed at the construction, expansion, rearrangement or other modification (including demolition) of immovable property and subject to acquiescence or authorisation by the building authority; Hiring-out of employees and the supply of staff in relation to supplies mentioned above; Supply of scrap and waste products; Supply of a building and the land on which it stands or of an inbuilt plot of land (with certain exceptions) if the supplier opted for taxation; In relation with debtors and creditors, the supply of goods that were pledged as collateral security to cover an overdue claim in execution of that security; Supply of goods qualifying as tangible assets or which have an open market value of more than HUF 100 000 (EUR 334) used by the taxable person for the purposes of his business if the supplier is adjudicated in liquidation proceedings or any similar insolvency proceedings; Supply of CO2 emissions allowances; Supply of certain specific agricultural products such as wheat and meslin, rye, barley, oats, maize, triticale, soya beans whether or not broken; rape and colza seeds whether or not broken; sunflower seeds whether or not broken. Supply of certain iron and non-alloy steel products such as flat-rolled products of iron or non-alloy steel, bars and rods of iron or non-alloy steel, angles, shapes and sections of iron or non-alloy steel, wire of iron or non-alloy steel, tubes, pipes and hollow profiles of iron or non-alloy steel.
Iceland	-
Ireland	Supply of construction services supplied by sub-contractors to principal contractors; Supply of immovable property under the option for taxation (including sale by receiver, liquidator or mortgagee in possession; Supply of used material and scrap metal; Supply of CO2 emissions allowances; Supply of gas and electricity by a business in Ireland to a taxable dealer carrying on business in Ireland; Supply of gas certificates or electricity certificates by a business in Ireland to another business in Ireland.
Israel	A person not liable for payment of the tax may, with the Director's consent and on conditions prescribed by him, take the payment upon himself, and after the date of that consent be treated as the person liable for its payment; The tax levied on a buyer, if the buyer is a dealer, a non-profit organisation or a financial institution and has committed a real estate sale which is an occasional transaction; Sale of metal debris; Services of the types specified below acquired by a dealer, a non-profit organisation or a financial institution from a person, whose main income is from wage, benefit or pension, shall pay the tax in respect of that service, unless a tax invoice was received from the person rendering the service: Artistic performance; construction or preparation of stage sets; preparation, checking, conducting and supervising exams; lectures etc. Services of the following professionals: agronomist, architect, ; practical engineer; private investigator; rabbinical pleader; technician; dental technician; organizational, management, scientific or tax consultant; economist; engineer etc.
Italy	Supplies carried out by subcontractors in the building sector; Supply of staff engaged in the construction sector; Supply of immovable property under the option for taxation; Supply of used materials, scrap, waste and specific services; Supply of investment gold, including supply of semi-finished products and of gold of a purity of at least 325 thousandths(so called industrial gold); Supply of scrap iron; Supply of mobile phones, tablets, personal computers and integrated circuit devices under certain conditions; Supply of CO2 emission allowances; Supply of gas and electric energy to taxable dealers; Supply of gas and electric energy certificates.	Supplies of goods and services to public authorities or government bodies, public owned companies, and companies listed on the Italian Stock Market (FITSE-MIB)
Japan
Korea	-	For supplies of gold bullion (99.5% or higher purity) and second hand gold products (with 58.5% or higher purity), copper, gold and iron scrap, the supplier must open a bank account designated for the gold or scrap transactions and the purchase price (without VAT) must be transferred to the supplier using the designated bank account. At the same time, the recipient must also deposit the relevant VAT amount into an account designated by the Director of the National Tax Services.
Latvia	Supply of timber and services related thereto; Supply of construction services; Supply of scrap metals and services related thereto; Supply of mobile telephones, integrated circuit devices, tablet PC’s and laptops; Supply of cereals and industrial crops (including oil seeds), including mixtures of these goods, that are not normally used in the unaltered state for final consumption; Supply of raw and semi-finished precious metals, where they are not covered by special scheme for investment gold, raw and semi-finished precious metal alloys and precious metal clad, as well as precious metal or precious metal clad scrap and debris; Supply of video game consoles; Supply of ferrous and non-ferrous semi-finished metals.
Lithuania*	Supply of hard drives; Supply of mobile phones, tablets and laptops; Supply of construction services; Supply of ferrous waste and scrap, residues and other recyclable materials consisting of ferrous and non-ferrous metals; Supply of essential (material) improvement to the owner of the building; VAT calculated on assets taken over as a contribution in kind or due to reorganisation of another person registered for VAT purposes.
Luxembourg	Supply of CO2 emission allowances; supply of gas and electricity certificates.
Mexico	Domestic reverse charge applies to: Corporations that receive independent personal services from individuals or rent goods from them; acquire waste to be used for commercial or industrial activities; receive services rendered by commissionaires who are individuals; and receive land motor transportation services of goods lent to both individuals and corporations; Credit institutions acquiring assets through payments in kind or through legal or trust adjudication; and Individuals or entities acquiring or having temporary use or enjoyment of tangible assets transferred or granted by foreign residents who do not have a permanent establishment in Mexico.
Netherlands	Supply of construction work (including shipbuilding), including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, including the handing over of construction works; Supply of staff engaged in the construction sector; Supply of immovable property under the option for taxation; Supply of used materials, scrap, waste and specific services; Supply of goods provided as security by one taxable person to another in execution of that security; Supply of immovable property sold by a judgement debtor in a compulsory sale procedure; Supply of CO2 emission allowances; Supply of mobile phones, integrated circuit devices, laptops, game consoles and tablet pc’s provided that the value of the transactions exceeds EUR 10,000. Supply of gas and electricity certificates (e.g. green certificates, guarantees of origin).
New Zealand	If the supply of land has been incorrectly zero-rated and the incorrect treatment is discovered after settlement, the recipient of the supply is made responsible for paying the GST.
Norway	Supply of CO2 emission allowances; Supply of investment gold (with purity equal to or greater than 325 thousandths).
Poland	As of November 2019 the domestic reverse charge mechanism was replaced by a mandatory split payment mechanism. As of that date, supplies previously covered by the domestic reverse charge are now subject to the mandatory split payment.	As of November 2019, a mandatory split payment mechanism for transactions that meet the following conditions: (1) the total gross amount of the invoice exceeds PLN 15 000; (2) one or more items on the invoice are goods or services enumerated in Annex no. 15 to the Polish VAT Act; and (3) supplier and buyer are VAT payers. This Annex no. 15 covers in particular: fuels, steel, steel products, scrap, waste, precious metals (e.g. gold, silver) and non-precious metals (e.g. copper), stretch foil, tablets, smartphones, consoles, computers, HDD and SDD hard drives, electronic equipment, construction services, parts and accessories for motor vehicles, coal and coal products, electrical machinery and equipment and their parts and accessories, services for the transfer of CO2 emission allowances. Upon decision of the customer, an optional split payment mechanism can be applied to B2B supplies which are not covered by the mandatory split payment (all taxpayers who want to use an optional split payment mechanism must have a VAT account associated with their bank account separating the VAT from the net amount of the transaction).
Portugal	Supply of used material, scrap metal, waste and specific services; Supply of immovable property under the option for taxation; Work on immovable property (such as repair, cleaning, maintenance, alteration and demolition services, including the handing over of construction works); Supply of taxable investment gold and gold material of purity equal to or greater than 325 thousandths; Supplies of CO2 emission allowances; Supplies of cork, wood, pine cones and pine kernels in their shell.
Slovak Republic	Supply of immovable property under the option for taxation; Supply of goods which are pledged as a security of a receivable of a creditor within the enforcement of such pledge; Supply of a building or a part of a building in the Slovak Republic which the supplier as a debtor recognised by a court or another relevant state authority sold within the statutory enforcement proceedings; Supply of investment gold and of gold material or semi-manufactured products of gold of a purity of at least 325 thousandths between taxable persons; Supply of metal scrap and metal waste; Supply of CO2 emission allowances; Supply of cereals and oil seeds, grains, straw and fodder crops, which are not typically intended in the unaltered state for final consumption; Supplies of iron and steel; Supply of mobile phones, being devices made or adapted for use in connection with a licensed network and operated on specified frequencies, whether or not they have any other use, if the taxable amount in the invoice for the supply of mobile telephones is EUR 5 000 and more; Supply of integrated circuit devices such as microprocessors and central processing units in a state prior to integration into end user products, if the taxable amount in the invoice for the supply is EUR 5 000 and more; Supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property as well as the handing over of construction works regarded as a supply of goods.
Slovenia	Supply of construction work (including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property); Supply of staff engaged in the mentioned activities; Supply of certain immovable property, where the supplier has opted for taxation of the supply; Supply of certain waste, scrap, used material and services; Supply of allowances to emit greenhouse gases.
Spain	Construction works, including the supply of staff for its performance, in the framework of development, construction or renovation of immovable property; Supply of CO2 emission allowances; Supply of metal scrap and metal waste; Supply of investment gold and supply of gold material or semi-finished products of a purity of at least 325 thousandths; Supply of buildings in certain situations; Supply of immovable property within bankruptcy proceedings; Supply of immovable property made under enforcement of a security or with the obligation for the acquirer to settle the securitized debt; Supply of mobile phones, videogame consoles, laptop and tablet PCs, only where the customer is a reseller of the goods (traders habitually engaging in the resale of these goods) or, otherwise, where the total amount of supplies to one trader exceeds EUR 10,000; Supply of silver, platinum and palladium.
Sweden	Supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, including the handing over of construction works; Supply of staff engaged in the construction sector; Supply of CO2 emissions allowances; Supply of used materials, scrap, waste and specific services; Supply of investment gold and gold products of a purity of at least 325 thousandths; Supply of mobile phones, certain integrated circuit devices, games consoles, tablet PCs and laptops, where the taxable amount of the supplies of such goods in an invoice exceeds SEK 100 000.
Switzerland	-	-
Türkiye	Supply of lease of movable property by non-taxable persons to taxable persons; Supply of scientific, artistic and literary works provided to taxable persons. Supply of advertisement services provided by non-taxable persons to taxable persons.	Certain recipients of a number of specified services are required to withhold a percentage of the VAT charged to them by the service provider and remit it directly to the tax authorities (partial withholding). Among others, these services are (a) supervisory services for building construction, (b) scrap metal, glass, plastic and paper (in cases where the supplier waives the VAT exemption), (c) advisory, supervisory and audit services maintenance and (d) repair services for machinery, equipment and other fixed assets.
United Kingdom	Supply of investment gold and of gold products of a purity of at least 325 thousandths; Supply of CO2 emissions allowances; Supply of mobile phones and integrated circuit devices if the value of the goods supplied exceeds GBP 5,000 (VAT inclusive). The value limit does not apply to services; Supply of gas through a natural gas system situated in the United Kingdom or any network connected to such a system and to electricity; Wholesale supply of electronic communication services; Supply of renewable energy certificates. Supplies of building and construction services by subcontractors to contractors.

Notes:

1. For the purpose of this table, a “domestic reverse charge” regime refers to a VAT collection regime whereby the customer rather than the supplier of goods, services or intangibles is liable to remit the VAT to the tax authorities on a wholly domestic supply (i.e. a supply where both the supplier and the customer are established in the taxing jurisdiction). The supplier does not charge the VAT to the customer.

2.^.For the purpose of this table, a “domestic split payment mechanism” is a mechanism whereby the supplier remains liable to charge the VAT to the customer on a wholly domestic supply of goods, services or intangibles, but where (part of) this VAT is directly transferred to the tax authorities or to a specific (blocked) “VAT account” that may belong to the supplier or customer.

* Lithuania. Domestic reverse charge for supply of hard drives was applicable until 28 February 2022.

Source: national delegates; position as at 1 January 2022

Annex Table 2.A.13. Application of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) – Restrictions regarding its application to VAT

Country	VAT covered by the MAAC3	Reservations2 to the application of the MAAC1 to VAT4
		Reservation to provide assistance in the exchange of information based on Art. 30 (1) (a)	Reservation to provide assistance in the recovery of VAT claims or administrative fines based on Art. 30 (1) (b)	Reservation to provide assistance in the service of documents based on Art. 30 (1) (d)
Australia	Yes
Austria	Yes		Reservation
Belgium	Yes
Canada	Yes		Reservation	Reservation
Chile	Yes		Reservation	Reservation
Colombia	Yes		Reservation	Reservation
Costa Rica	Yes		Reservation	Reservation
Czech Republic	Yes
Denmark	Yes
Estonia	Yes
Finland	Yes
France	Yes
Germany	Yes		Reservation
Greece	Yes			-
Hungary	Yes
Iceland	Yes
Ireland	Yes
Israel	No	No assistance	No assistance	No assistance
Italy	Yes
Japan	Yes			-
Korea	Yes		-	Reservation
Latvia	Yes
Lithuania	Yes
Luxembourg	No	No assistance	No assistance	No assistance
Mexico	Yes			-
Netherlands	Yes
New Zealand	Yes
Norway	Yes
Poland	Yes
Portugal	Yes
Slovak Republic	Yes
Slovenia	Yes
Spain	Yes
Sweden	Yes
Switzerland	No	No assistance	No assistance	No assistance
Türkiye	Yes
United Kingdom	Yes
United States5	Yes		Reservation	Reservation

Notes:

1. This table refers to the participation of States to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), i.e. where the MAAC has entered into force following the signature of either the original convention and its protocol or the amended convention, and the subsequent deposit of the instrument of ratification, acceptance or approval. More detail can be found at https://www.oecd.org/tax/exchange-of-tax-information/Status_of_convention.pdf.

2. Reservations are provided by Art. 30 (1) (a), (b) and (d) of the MAAC. Article 30 (1) (a) to (f) enables a State to sign the MAAC with reservations about the type of tax to be covered or the type of assistance to be provided, so that it may limit its participation in the provision of mutual assistance under the MAAC to certain taxes or certain forms of assistance. This table shows reservations provided by Art. 30 (1) (a), (b) and (d) of the MAAC. Reservations shown for Art. 30 (1) (a) in this table are those concerning forms of assistance other than those covered by (b) and (d) i.e. exchange of information, simultaneous tax examinations and tax examinations abroad.

3. According to paragraph 2 of Article 2 of the MAAC, the participant States’ existing taxes to which the MAAC shall apply are listed in the Annex A to the Convention. These are the taxes in relation to which a Party to the MAAC expects to receive assistance and should not include a tax in respect of which such jurisdiction has made a reservation under paragraph 1, sub-paragraph a, of Article 30

4. Even if a State does not include a general consumption tax, such as VAT, as tax covered by the Convention according to paragraph 2 of Article 2 of the MAAC, it remains committed to providing administrative assistance in relation to such a tax of other States, unless it makes a reservation under paragraph 1, of Article 30. On the other hand, if a State includes VAT in the scope of the Convention, it may still reserve the right not to provide certain forms of assistance related to this tax.

5. The United States will only provide assistance for the purposes of the exchange of information with respect to VATs imposed at the national level as covered in Article 2, b.iii. Assistance will not be provided for other forms of assistance or for VATs imposed at the subnational level by virtue of Article 2, b.iv.

Source: National delegates, situation as at 1 January 2022.

Note

← 1.  OECD. Tax policy responses to COVID-19; table with measures taken by countries, http://www.oecd.org/tax/covid-19-tax-policy-and-other-measures.xlsm.