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Which VAT rate should I apply to services?

Services are excluded from the general VAT rules applied to goods as it is dependent on the kind of service being provided. Depending on the particular country, certain services are charged at the standard VAT rate, certain services at a reduced rate, and others are zero-rated. For service-related reduced VAT rates, often countries will have a number of different reduced VAT rates depending on the type of service.

Some examples are listed below, these are common examples, actual exemptions and VAT rates will differ from country to country:

  • Standard VAT rate: Any service not covered by a zero or reduced VAT rate.
  • Reduced VAT rate: Social services.
  • Zero-VAT-rated: Printing services.

EU VAT Rates

The EU sets the broad VAT rules through European VAT Directives, and has set the minimum standard VAT rate at 15%.  The 27 member states (and the UK) are otherwise free to set their own standard VAT rates. The EU also permits a maximum of two reduced rates, the lowest of which must be 5% or above. Some countries have variations on this, including a third, reduced VAT rate, which they had in place prior to their accession to the EU.

See the Avalara VATLive website for more information on VAT rates.

Digital services

As countries around the world shift their tax burden from direct to indirect taxes, taxation of cross-border digital services is increasing.

2020 saw a record 11 countries implement VAT on foreign providers of digital services. By the end of 2020, 71 countries have implemented VAT on foreign providers of digital services. A further 15 countries have announced plans to extend VAT to digital services.

See the Avalara VATLive Digital Services page for more information on Digital Service VAT rates.

Note 

Note

Avalara AvaTax is a tax compliance solution that automates the complexities of calculating sales tax, VAT, and GST. Please ask your Customer Account Manager about Avalara AvaTax and how it can help with your VAT calculations.
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