VAT Rates Worldwide: Complete Comparison Guide

Value Added Tax (VAT) or Goods and Services Tax (GST) is a consumption tax added at each stage of production. Unlike income tax, VAT affects everyone regardless of income ??it's baked into the price of goods and services. For consumers, high VAT means a higher cost of living. For businesses, VAT compliance adds administrative burden. Some countries (US, Hong Kong, Cayman Islands) have no VAT at all, while Hungary tops the chart at 27%.

A comparison of standard VAT/GST rates globally.

Most VAT countries apply reduced rates to essential items: food (5-10% in most EU countries), medicines (0-5%), books and education (0-9%), public transport, children's clothing, and domestic energy. Some notable examples: UK has 0% VAT on food and children's clothes; France has 5.5% on food; Switzerland charges only 2.6% on food. Understanding reduced rates matters for cost of living calculations ??a country with 25% standard VAT but 5% on food may be more affordable day-to-day than a country with 20% on everything.

For online businesses, VAT rules have become increasingly complex. EU VAT rules require collecting VAT in the customer's country for B2C digital services (OSS system). The thresholds and rules vary: EU has the One-Stop Shop, UK has separate registration above GBP 85k. For B2B sales, the reverse charge mechanism shifts VAT responsibility to the buyer. Digital products (software, e-books, online courses) are now subject to VAT in most jurisdictions. If you sell to consumers in multiple countries, VAT compliance can be a significant cost ??consider using VAT automation tools.