There have been a number of changes and announcements of increases in VAT rates across Europe. The changes together with an analysis of all the VAT rates, country codes and VAT registration details are outlined below.
The French government announced that it will be increasing its standard rate of VAT, currently 19.6%. The percentage increase isn’t known, but it is predicted to come into force before the Presidential elections in April. The aim is to increase VAT to fund a reduction in labour taxes.
This proposed change follows earlier increases to the reduced rate which resulted in a 1.5% increase as of January 2012 from 5.5% to 7%. The exceptions to the increase from 5.5% to 7% are:
The Cypriot government had proposed a 2% hike in the standard rate of VAT to 17%. The proposal was made on 26 August and was approved by parliament on 16 December 2011. The change comes into force from 1 March 2012.
The Italian government announced its plans to increase VAT by a further 2% to 23%. Subject to parliamentary approval the expected implementation date for this increase is September 2012. This proposed change may not occur if market conditions improve. The proposal goes one step further and will further increase the VAT rate by 0.5% in January 2014 making the standard rate of VAT in Italy 23.5%.
These changes are reflected by a similar proposal to increase the reduced rate by 2% to 12% with a further increase by 0.5% in January 2014 making the reduced rate of VAT in Italy 12.5%. The reduced rate for example applies to restaurant supplies, touristic products and certain foods.
There are no proposals to change the lower reduced rate of 4%. For example the lower reduced rate applies to the construction of new residential accommodation, newspapers, magazines, books and staple foods.
The Portuguese government’s change in the rate of VAT on certain restaurant meals came into effect from January 2012. The change increases VAT charged on these services to the standard rate of VAT at 23% instead of the current rates of 6% and 13%. There are some exemptions and bottled water, both sparkling and still, will be charged at 13%, previously charged at 6%.
In March 2011 the Czech Republic government had proposed to merge the reduced rate of VAT (currently 10%) with the standard rate of VAT (currently 20%) to form a combined rate of 17.5%. The original proposal was to make these changes in 2013. The implementation date has been brought forward with the reduced rate of VAT being 14% from January 2012 and then later in 2012 the merging of a combined standard/reduced rate at new rate of 19%.
The reason for the accelerating changes and increasing the combined rate as stated by other EU countries is worsening economic conditions.
The Hungarian government’s increase in its standard rate of VAT by 2% to 27% is effective from January 2012. This is now the highest VAT rate in Europe, dispelling the myth that the standard rate of VAT cannot exceed 25%. There is legislation in place stating only the minimum level of VAT, 15%, not the maximum.
The Hungarian government has also been considering the introduction of a super VAT rate of 35% on luxury goods. This proposal has yet to receive European Commission approval.
The proposal to increase the standard rate of VAT in Ireland by 2% received government approval in December 2011. This change is effective from 1 January 2012 and means the Irish standard rate of VAT will be 23%.
Due to the disappointing growth of the Lithuanian economy the government is proposing an increase to the standard rate of VAT. No date has been set; however, any changes are likely to be in 2012 and it is proposed to be a 2% increase on the current rate of 21%.
See our complete analysis of VAT rates across the European Union. Details include what VAT is called in each country, country codes, standard rates of VAT, the format each country uses for VAT registration numbers, the frequency and useful links to official government websites.