DIFFERENT EU VAT RATES

Within an EU country, there are different VAT rates, depending on the type of product or service being sold. In all member states - 

  1. most supplies of goods and services bear a standard rate of at least 15%; 
  2. member states may also charge one or two reduced rates, not less than 5%, on selected goods;
  3. super reduced rates, less than 5%, are also applied on specified items, including zero rates

It’s important to note that a reduced rate of 0% (zero-rated) used by some countries is a taxable rate of VAT even though it’s zero. Thus, revenue generated from zero-rated goods is still included in the taxable revenue. 

There are some supplies pertaining to public interests like education, financial and medical services, that are exempt of VAT. 

There are supplies that are outside the scope of VAT, examples include - supplies made by someone who isn't a taxable person, supplies not made in the EU and grants or donations where the giver receives no benefit. 

 

DIFFERENCE BETWEEN “ZERO-RATE” AND “EXEMPT” SUPPLIES - 

It might seem that they’re the same as no amount of VAT gets charged in both cases. But there is an important distinction - if something is sold and zero-rate VAT is applied, businesses can still claim the VAT paid on their purchases. In case of “exempt” supplies, however, businesses cannot register for VAT and are not entitled to a VAT reclaim on their business expenditure.  

 

HERE ARE TWO EXAMPLES - 

1. Spain’s VAT Rates -

Standard VAT rate - 21% 

Reduced VAT rates - 10% (Applied on selected supplies, including - Medical, Pharmaceuticals, Transport of passengers)

Reduced VAT rates - 4% (Applied on selected supplies, including - Basic food items, Newspapers)

2. UK’s VAT Rates

Standard VAT Rate - 20%

Reduced VAT rates - 5% (Applied on selected supplies, including - Domestic fuel, Some stop smoking products, Children’s car seats, Property renovations) 

Reduced VAT rates - 0% (Applied on selected supplies, including - Basic food items, Children’s clothing, Most public transport)