VAT Rates in Europe, 2025

The EU countries with the highest standard VAT rates are Hungary (27 percent), Finland (25.5 percent) and Croatia, Denmark, and Sweden (all at 25 percent). Luxembourg levies the lowest standard VAT rate at 17 percent, followed by Malta (18 percent) and Cyprus, Germany, and Romania (all at 19 percent). The EU’s average standard VAT rate is 21.8 percent, nearly seven percentage points higher than the minimum standard VAT rate required by EU regulation.

Among the eight major European countries that are not part of the European Union—Georgia, Iceland, Moldova, Norway, Switzerland, Turkey, Ukraine, and the United Kingdom—only Switzerland levies a standard VAT rate below the EU minimum at a rate of 8.1 percent. In comparison, in the United States, combined state and local sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rates averaged only 7.5 percent in 2024.

Generally, consumption taxes are an economically efficient way of raising tax revenue. To minimize economic distortions, there is ideally only one standard rate that is levied on all final consumption, with as few exemptions as possible. However, EU countries levy reduced rates and exempt certain goods and services from VAT.

One of the main reasons for reduced VAT rates and VAT-exempted goods/services is the promotion of equity, as lower-income households tend to spend a larger share of their incomes on goods and services such as food and public transportation. Other reasons include encouraging the consumption of “merit goods” (e.g., books), promoting local services (e.g., tourism), and correcting externalities (e.g., clean power).

However, evidence shows that reduced VAT rates and VAT exemptions are not necessarily effective in achieving these policy goals and can even be regressive in some instances. Such reduced rates and exemptions can lead to higher administrative and compliance costs and can create economic distortions. A recent study shows that scrapping VAT-reduced rates in EU countries will allow standard rates to drop under 15 percent. To address equity concerns, the OECD instead recommends measures that directly increase poorer households’ real incomes.

Notable 2025 VAT Rate Changes

Many European countries have made changes to their VAT rates from last year. Bulgaria phased out temporary rate reductions for some items introduced during the pandemic. Estonia has broadened its VAT base by moving some items to higher rates and is set to increase its standard rate from 22 percent to 24 percent in July 2025. Finland raised its standard rate from 24 to 25.5 percent and broadened its VAT base by moving most items from the 10 to the 14 percent bracket in September 2024. Moldova introduced a temporary reduced rate of 6 percent for restaurant and cafe services from December 2024 to June 2025. The Netherlands moved some items from the reduced to the standard rate. Slovakia increased its standard rate from 20 to 23 percent, its reduced rate from 10 to 19 percent, and shifted many items to different rates. The United Kingdom abolished its VAT exemption for private education fees.

Belgium and Ireland have prolonged temporary reduced rates for some items introduced during the pandemic until June and April 2025, respectively.