VAT  – Value-added tax is a consumption tax charged on the value added of goods and services as they move through the supply chain. This tax in different countries has different names for example GST – goods and service tax. Businesses registered for VAT  must collect the consumption tax at each stage of the supply chain, although it is ultimately paid by the end consumer. Collecting the tax on behalf of the government is a requirement for these businesses. The main difference from the sale tax is that VAT is charged at each stage of a sale and sales tax is only at the last stage where consumption takes place.

Filing regular tax returns and making payments based on the amount of tax collected is required for businesses registered for Value Added Tax or sales tax in most countries. The VAT number is used to identify the business on tax invoices and payments, ensuring the correct amount of tax is paid.

The purpose of VAT

The main goal of a VAT number is to identify and monitor businesses that have registered for VAT with the tax authorities. Businesses without a valid VAT number or those that are not registered for VAT may face penalties and fines.

Regular VAT returns are submitted to tax authorities, detailing collected and paid VAT within a timeframe. Identifying businesses on returns, ensuring correct VAT collection and payment, and tracking payments and refunds is the role of the VAT number. It is important to differentiate between Tax ID and VAT number  – tax ID means that a business is registered with a specific tax authority for direct taxes. Usually, companies need additional application forms to obtain VAT registration and VAT certificate.

Find a company VAT number

To ensure compliance with varying VAT rules, businesses trading within the European Union (EU) need to check the VAT status of their trading partners. A VAT number is critical in this process.

Obtain VAT

To obtain a VAT number, a business must follow these 4 steps:

1. Determine whether registration as a VAT payer is required based on turnover and economic activity of the company  (for example, revenue is more than a country threshold). In some countries, voluntary registration is also possible;
2. Collect the necessary information: the name of the organization, address, tax identification number, and other documents;
3. Fill out and submit registration forms to the tax office;
4. Get a VAT certificate.

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The format of VAT number

Usually, the number in the VAT certificate consists of numbers but when a company uses it for international transactions they need to add two letters as a sign of the country of origin. For intra-EU trade, the format of VAT numbers generally follows a standard pattern, consisting of two letters followed by a series of numbers. The initial two letters signify the country in which the business is registered, while the subsequent numbers constitute a unique identification code for the business. For instance, VAT number assigned in France might be formatted as follows:

FR 123456789

The format of VAT numbers in the United Kingdom differs for the Northern Ireland region – these companies need to add XI at the beginning of their number when they trade with the EU.

Countries where VAT is implemented:

Country	Standard VAT Rate %	Reduced rate %
Afghanistan	10
Albania	20	6
Algeria	19	9
Andorra	4.5	0; 1; 2.5
Angola	14	0; 1; 2; 5; 7
Anguilla	13	0
Antigua and Barbuda	15	0; 14
Argentina	21	2.5; 5; 10.5
Armenia	20	0
Australia	10	0
Austria	20	10; 13
Azerbaijan	18	0
Bahamas	10
Bangladesh	15	5; 7; 10
Barbados	17.5	0; 7.5
Bahrain	10	0
Belarus	20	0; 10
Belgium	21	0; 6; 12
Belize	12.5	0
Benin	18	0
Bhutan	7	0
Bolivia	13	0
Bosnia and Herzegovina	17
Botswana	12	0
Brazil	17; 18	4; 7; 12
British Virgin Islands	21
Bulgaria	20	9
Burkina Faso	18	0; 10
Burundi	18	0; 10
Cabo Verde	15	0; 8
Cambodia	10
Cameroon	19.25	0
Canada	GST/HST: 5, 13, 15
Central African Republic	19	0; 5
Chad	18	0; 9
Chile	19
China	13	1; 1.5; 3; 6; 9
Cook Islands	15	0
Colombia	19	0; 5
Comoros	10
Congo (Dem. Republic)	16	0; 8
Congo (Republic)	18	0; 5
Costa Rica	13	1; 2; 4
Côte d’Ivoire	18	0; 9
Ivory Coast	18
Croatia	25	5; 13
Cyprus	19	0; 5; 9
Czech Republic	21	12
Denmark	25	0
Djibouti	10	0
Dominica	15	0; 10
Dominican Republic	18	0; 16
Ecuador	12	0
Egypt	14	0; 5
El Salvador	13	0
Equatorial Guinea	15	0; 6
Eritrea	3; 5; 10; 12
Estonia	22	0; 9
Eswatini (formerly Swaziland)	15	0
Ethiopia	15	0
Faroe Islands	25	0
Fiji	9	0
Finland	24	0; 10; 14
France	20	2.1; 5.5; 10
Gabon	18	0; 10
Gambia	15	0
Georgia	18	0
Germany	19	7
Ghana	12.5	0; 3
Greece	24	6; 13
Grenada	15	0; 10
Guatemala	12	0
Guinea	18	0
Guinea-Bissau	17	0; 10
Guyana	14	0
Haiti	10
Honduras	15	0
Hungary	27	5; 18
Iceland	24	0; 11
India	12; 18	0; 5
Indonesia	11	0
Iran	9	0
Ireland	23	0; 4.8; 9; 13.5
Isle of Man	20	0; 5
Israel	17	0
Italy	22	4; 5; 10
Jamaica	15	2; 10
Japan	10	8
Jersey	5	0
Jordan	16	0; 2; 4; 5; 10
Kazakhstan	12	0
Kenya	16	0; 8
Kiribati	12.5	0
Korea	10
Kosovo	18	8
Kyrgyzstan	12	0
Laos	7	0
Latvia	21	5; 12
Lebanon	11	0
Lesotho	15	0; 10
Liechtenstein	7.7	2.5; 3.7
Lithuania	21	5; 9
Luxembourg	17	8; 14
Madagascar	20	0
Malawi	16.5	0
Malaysia	10
Maldives	6	0
Mali	18	5
Malta	18	0; 5; 7
Marshall Islands	2-4
Mauritania	16
Mauritius	15	0
Mexico	16	0
Micronesia	5
Moldova	20	0; 8
Monaco	20	2.1; 5.5; 10
Mongolia	10	0
Montenegro	21	0; 7
Morocco	20	0; 7; 10; 14
Mozambique	17	0; 5
Myanmar (formerly Burma)	5
Namibia	15	0
Nepal	13	0
Netherlands	21	9
New Zealand	15	0
Nicaragua	15	0
Niger	19	0; 5; 10
Nigeria	7.5	0
Niue	12.5	0
North Korea	15
North Macedonia (formerly Macedonia)	18	5; 10
Norway	25	0; 12; 15
Oman	5	0
Palau	10
Pakistan	17	0-16
Palestine	16
Panama	7
Papua New Guinea	10	0
Paraguay	10	5
Peru	21	0
Philippines	12	0; 5
Poland	23	5; 8
Portugal	23	6; 13
Romania	19	5; 9
Russia	20	0; 10
Rwanda	18	0
Saint Kitts and Nevis	17	10
Saint Lucia	16	0; 10
Saint Vincent and the Grenadines	16	0; 11
Samoa	15	0
Sao Tome and Principe	15
Saudi Arabia	15	0
Senegal	18	0; 10
Serbia	20	10
Seychelles	15	0
Sierra Leone	15	0
Singapore	8	0
Slovakia	20	10
Slovenia	22	5; 9.5
Solomon Islands	10
Somalia	10
South Africa	15	0
South Korea	10
Spain	21	4; 10
Sri Lanka	8	0
Sudan	18	0
Sweden	25	0; 6; 12
Switzerland	8.1	2.6; 3.8
Chinese Taipei	5	0
Taiwan, China	5
Tajikistan	15	5
Tanzania	18	0
Thailand	7	0; 7
Togo	18	10
Tonga	15
Trinidad and Tobago	12.5	0
Tunisia	19	0; 7; 13
Turkey	18	1; 8
Turkmenistan	15	0
Uganda	18	0
Ukraine	20	0; 7; 14
United Arab Emirates	5	0
United Kingdom	20	0; 5
Uruguay	22	0; 10
Uzbekistan	20	0
Vanuatu	15	0
Venezuela	16	8
Vietnam	10	0; 5
Zambia	16	0
Zimbabwe	14.5	0

The data is updated on 20.02.2024

What is the difference between VAT and sales tax?

Sales tax is a concept used in several countries, notably the United States. That is added only at the final point of sale. To determine the total sales tax, you need to know the number of transactions. Tracking the number of sales accurately is crucial for compliance, especially when dealing with external customers.

VAT is added at every stage of production and sale. From when the toy is made to when it’s packaged and finally sold to the customer. The number of stages involved in the production process can impact the total VAT collected. The number of registrations in each country reflects the importance of VAT in local and cross-border trade. In some countries, value-added tax is called Goods and Services Tax (GST). GST works similarly to VAT.

What is the difference between sales tax and VAT thresholds?

The concept of thresholds helps businesses determine when they need to register for VAT. The number of thresholds varies by jurisdiction, and companies must be aware of these, especially when conducting international sales. Here’s a simple breakdown of the differences between sales tax thresholds and VAT thresholds:

Sales Tax Thresholds

The sales tax threshold is the number of transactions or the total sales volume at which a company must register to collect sales tax.

Domestic Sales: A business with a physical presence, such as a store or office, must register for sales tax collection, even if the number of sales is low. Tracking sales volume is crucial in determining when the business needs to register. A sales tax certificate might be required to validate the business’s obligation to collect and remit sales tax.

Purpose: Small businesses are exempt from paying sales tax and do not have to register if their number of sales is below a certain level. This avoids adding an extra burden on small and medium-sized companies, including those dealing with out-of-state customers. A certificate of exemption might be necessary to confirm this status.

Example: In California, a business must register once its sales reach the $500,000 threshold. Keeping track of the number of sales is important for foreign transactions. Companies should also ensure that their sales invoices reflect the correct sales tax collected.

Compliance and Automation: Many businesses use automated tools or software to simplify the process of tracking sales and ensuring compliance with sales tax thresholds. These tools often include features that allow companies to monitor their sales data in real time, flagging when a threshold is about to be crossed. Such automation avoids penalties for companies dealing with multiple states or countries. Implementing automated systems not only helps in maintaining compliance but also reduces the risk of human error. For instance, some software solutions provide code that can be integrated into a business’s accounting systems to ensure that all registered sales and transactions are accurately tracked.

Incorporating automated code helps to ensure that all necessary tax regulations are met without manual intervention.

VAT Thresholds

Domestic and International Sales:

Domestic Sales: VAT thresholds are often set for businesses selling within a country. If a company’s sales exceed this VAT threshold, it must register for VAT. The number of sales can directly impact VAT registration, especially when considering export sales. VAT registration is necessary for businesses to comply with VAT law in their home country or in the country where the buyer is located. Each invoice must accurately reflect VAT amounts to ensure compliance. A VAT registration certificate might be required to prove compliance in these situations. Businesses need to stand ready to manage their VAT obligations efficiently as they grow.

International Sales: If goods or services are sold to consumers in another EU country and exceed the distance selling VAT threshold in that country, they must register for VAT there. The number of international sales transactions, especially remote sales, is crucial for determining VAT compliance. Businesses must monitor the volume of sales in each country where they have customers to ensure they do not miss the deadline for VAT registration in those countries. Once registered, each invoice in international transactions must properly account for VAT, often supported by a VAT certificate. Crossing thresholds may require the business to register in these countries.

Purpose: VAT thresholds help small businesses by excluding them from VAT requirements until they reach a certain size. This reduces the administrative burden on smaller companies and simplifies VAT reporting in their country and other countries where they do business. The number of external sales below the threshold can exempt a business from VAT registration in foreign markets.

Example: Within Europe, the distance sales threshold for VAT registration is set at €10,000 for distance sales to other EU countries. EU companies that store goods outside of their home country cannot apply this threshold. If a business exceeds this threshold, it must register in Europe where it sells, or use the OSS scheme. The number of sales crossing the threshold triggers the VAT registration requirement. Registration is necessary to track the number of external transactions in each country, and each invoice must reflect VAT, validated by a VAT registration certificate.

In summary, VAT thresholds determine when a company must register for VAT based on its total sales or international sales. The number of transactions and sales volume plays a significant role in meeting these thresholds. Tracking the number of external sales in various regions helps businesses stay compliant with tax laws and determine when they need to register.

What is the VAT return?

A VAT return is a report businesses submit to tax authorities. It shows how much VAT they’ve collected from customers and how much VAT they’ve paid on purchases. The number of VAT transactions included in the return is crucial for accurate reporting. A VAT return is essential for companies to ensure they are compliant with VAT laws, particularly when foreign transactions are involved. It’s a way for businesses to report their VAT activity every few months or once a year, depending on the country’s VAT regulations. The number of VAT returns filed each year depends on foreign sales and country requirements. Each invoice related to VAT transactions must be properly accounted for in these returns.

Here’s a quick rundown of what’s typically included in a VAT return:

Sales and Output VAT: The total amount of VAT collected from sales to customers. The number of sales transactions, including foreign sales, and the corresponding VAT amounts are reported in the VAT return. Each invoice should detail the VAT collected.

Purchases and Input VAT: The total amount of VAT paid on business-related purchases. The number of purchase transactions, including those related to foreign suppliers, and the VAT paid are also included in the VAT return. Each invoice from suppliers should reflect the VAT paid.

VAT Payable or Refundable: The difference between the VAT collected and the VAT paid. If you’ve collected more VAT than you’ve paid, you owe the difference to the tax authorities. If you’ve paid more VAT than you’ve collected, you may be eligible for a VAT refund. This balance, and the number of transactions it covers, are reflected in the VAT return. Ensure that each invoice contributes accurately to this balance.

The frequency and specific requirements for VAT returns can vary depending on the country and the size of the company. The number of VAT returns a company must file depends on its reporting frequency. The VAT return process is critical for maintaining VAT compliance, and understanding how to complete a VAT return is essential for businesses in every country where VAT applies, particularly those dealing with foreign markets. The number of returns submitted annually ensures ongoing tax compliance and accurate invoice reporting.

What is Tax Representation?

Tax representation involves appointing an individual or firm to act on your behalf in dealings. The number of interactions with authorities can increase the complexity of this representation.

Filing and Compliance: Your representative can prepare and submit tax returns, ensuring they comply with relevant laws and regulations, including VAT laws in your country and any foreign country. The number of returns filed by your representative is a measure of their efficiency. They can also ensure accurate accounting of the number of transactions, especially those involving foreign clients, and the correct processing of each invoice.

Communication with Tax Authorities: They act as a liaison between you and the tax authorities in your country or any foreign country where VAT applies, addressing any queries, notices, or issues that arise, particularly those related to VAT. The number of communications and interactions can be crucial in resolving issues effectively. This can be particularly helpful during VAT audits or investigations, whether in your own country or abroad, where the number of documents and invoices reviewed might be substantial.

Planning and Advice: A representative can offer strategic guidance to minimize liabilities and optimize your financial position. The number of planning sessions or strategies implemented can significantly impact overall efficiency. This might include advice on VAT deductions, credits, or changes in VAT laws that affect you in your country or foreign countries. Proper identification and management of invoices are crucial in this process, ensuring that all transactions are correctly accounted for to maximize benefits.

Handling Disputes: If you have disputes with authorities, your representative can handle the negotiations, including VAT disputes in your country or a foreign country. The number of disputes managed by your representative can be a key indicator of their experience. They will work to resolve the issues on your behalf, ensuring that VAT compliance is maintained across all countries involved. The identification of disputed invoices and transactions is a key aspect of this role, allowing for accurate and effective dispute resolution.

Confidentiality and Professionalism: VAT representatives are bound by professional standards to handle your financial information confidentially and ethically, whether it pertains to your country or any foreign country. The number of clients they manage, including those with foreign operations, often reflects their trustworthiness and professionalism. Registering with a reliable representative ensures your business’s VAT matters are handled with care, including proper invoice management and accurate identification of taxable activities and transactions.