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VAT across the world - who pays the lowest rates?

Contributed by BridgeWest
July 17, 2017

The value added tax (VAT), in some countries known as the goods and services tax (GST), is an indirect tax levied in most countries around the world for a long time, while other countries such those in the Gulf Cooperation Council are about to enable it. By definition, the VAT is a consumption tax imposed to economic operators which is further charged on the consumers. The VAT is applied to all products and services before they reach the customers so that the full price already includes this tax at the final point of sale.

In order to create a picture on how the VAT is charged and the rates it is applied at, we can say that each country has its own tax laws which regulate it. While in some countries like New Zealand, Puerto Rico, Ireland, Luxembourg, Cyprus and Switzerland the VAT has low rates which range between 8% and 15% of the value of a product or service, there are also countries like Myanmar, Norway, Hungary and Denmark where the value added tax reaches higher rates. However, the highest VAT rate is charged in Bhutan, where its value is 50%.

Compared to the countries mentioned above, there are countries in Asia and Europe where the VAT has moderate values. Below we will take a look at countries like Spain and Germany in Europe and Singapore and Malaysia in Southeast Asia.

The VAT in Spain

Most European states nowadays are turning from a business-oriented taxation system to a more consumer-oriented one. It is also the case of Spain which has increased the VAT rate in 2012. The value added tax in Spain has a standard rate of 21% which is not too high or too low. Even so, the tax authorities also offer two reduced rates of 10% and 4% on certain goods and services. Exemptions from the Spanish VAT are also set in place in some cases, but we will treat each case separately.

The standard 21% rate applies to most products and services supplied in Spain and to make a general picture we will mention here cosmetic products, toiletries, various real estate properties which are set for demolition and plants.

The 10% reduced rate applies to agricultural products, water services, pharmaceutical products, hotels and restaurants, while the 4% rate applies to basic food products and the printed press. Financial and insurance companies are exempt from the VAT in Spain.

A special case is that of the Canary Islands which is a Spanish territory and where the standard rate of the value added tax is 7%.

The German value added tax

Things are simpler in Germany: the standard rate is 19%, a bit below the average imposed in countries in the European Union, and the German tax authorities also impose a lower rate of 7%. Germany also offers certain exemptions when it comes to the value added tax. An interesting fact about Germany is that it imposed the standard VAT rate on imports.

The 7% rate only applies to foodstuff and agricultural products, while the VAT exemptions are available for exported products. Intra-community and international transports, with a few exceptions, are applied a 0% VAT rate.

As Germany is a supporter of small businesses, it is worth mentioning that it has enabled various provisions related to their charge with the value added tax.

The Goods and Services Tax (GST) in Singapore

This is the same as the value added tax imposed in European countries only with a different name in Singapore. And just like in the other countries, the GST in Singapore is imposed at two rates – 7% and 0%. The 7% rate is imposed to most goods and services sold, respectively supplied in Singapore, while the 0% is applied on exports and on the supply of international services.

There are also goods and services exempt from the GST in Singapore, among which we can remind the sale and rental of residential property and the financial services.

The Goods and Services Tax in Malaysia

Once under the same flag, the GST is charged in Malaysia pretty much like in Singapore. Malaysia also imposes the GST at two rates: the standard rate which is 6% and the 0% rate. The standard 6% rate is charged to all businesses registered in Malaysia selling taxable goods or supplying taxable services.

The 0% rate of the Malaysian GST applies to goods and services like: foodstuff, water and electricity for the population, certain agricultural products, exports and international services.

Just like Singapore, Malaysia also provides for GST-free products and services among which private healthcare and education services, various financial services and residential property sales or rentals.

If you consider doing business or moving to one of the countries mentioned above, it wouldn't hurt to take a look at their taxation systems, including the charge of the value added tax if you want to know how you will be affected by it.


Tags: tax | services | Singapore | Malaysia | Spain | law | Germany | Europe | business | food | financial services | Tax | education | Hungary | Ireland | Luxembourg | small business | New Zealand | Norway | Puerto Rico | insurance



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