Guide

Taxation law in Europe

Value Added Tax in Europe

Value Added Tax (VAT) is charged on most goods and services sold and consumed in the European Union (EU). Businesses providing services to a business in another member state are subject to VAT where the buyer is located. The buyer accounts for this VAT using the 'reverse charge'. There are exceptions to this general rule.

VAT on consumer services will still normally be charged in their original member state. This may affect whether, and where, you need to register for VAT.

As a general rule, businesses importing goods with a value of more than £15 into the EU must pay VAT at the rate applicable in their member state. Goods for export outside the EU do not attract VAT.

Note that some special territories are within the EU customs area, but are treated as being outside the EU for VAT purposes. They are liable for excise duty and import VAT, because they are handled in the same way as goods imported from outside the EU.

UK-based businesses selling to a consumer or non-VAT registered company within the EU must charge VAT at the UK rate (20 per cent for most products, 5 per cent for reduced rate).

Businesses based in the UK with an annual turnover of VAT-taxable goods and services under £85,000 (current VAT registration thresholds) do not normally have to register for VAT.

If you are selling goods to VAT-registered businesses in EU countries, you may be able to zero-rate the sales if you meet certain conditions. See VAT rules when selling internationally (tool).

All EU countries apply a standard VAT rate of at least 15 per cent and a reduced rate of at least 5 per cent, applicable to a range of goods and services. VAT rules and rates.

Electronically supplied services (ESS) - including software downloads and online services - are subject to VAT in the state in which the customer is located, when supplied to business customers in another member state or when supplied from outside the EU.

ESS do not include information, cultural, artistic, sporting, scientific, educational, entertainment or similar services. These are all subject to VAT in the member state where the event takes place.