Minimum and maximum VAT rates in the EU

The European Union applies certain minimum and maximum VAT rates to be respected by all Member States. Within these margins, countries may design their own VAT policies, allowing them to optimise their revenues and tailor policies to national needs.

Within the EU, VAT rates should not be lower than 15% or more than 27%.

This area creates significant differences between Member States. The current EU minimum rate of 15% is no longer applied in practice; Luxembourg has the lowest high rate within the EU with 17%. On the other hand, Hungary has the highest VAT rate with 27%.

For companies that work VAT neutral, high or low rates are not directly a cost, but they do affect liquidity. The higher the rate, the more VAT you have to temporarily prefinance until the foreign tax authorities repay it.

In addition to high standard rates, there are exemptions, reduced rates and exemptions for specific goods and services. Think of foods or other basic products that are subject to a low rate in many countries (for example 9% in the Netherlands).

Thus, although the EU sets clear limits, there remains a great deal of variation possible, with significant implications for international companies operating in several Member States.