VAT in Europe 2026: why every country has different rates

19 percent in Germany, 20 percent in France, 27 percent in Hungary, 8.1 percent in Switzerland — and in Luxembourg there is a rate of exactly 3 percent for certain books. Anyone who invoices across Europe, runs an online store, or simply compares a hotel price will trip over VAT constantly. This article explains why there are so many different rates in the first place, what the EU legal framework looks like, how reverse charge and the One-Stop-Shop work, and what you need to know about the German small business exemption in 2026.

The legal framework: the EU VAT Directive

The central legal basis for VAT in the EU is the VAT Directive 2006/112/EC. It does not prescribe the concrete tax rates but defines the rules of the game: what counts as a supply of goods, what as a service, when it is taxable, where it is deemed to take place, who owes the tax. Every EU country transposes this directive into national law — in Germany via the Umsatzsteuergesetz (UStG), in Austria via the UStG 1994, in France via the Code Général des Impôts, and so on.

Directive 2022/542 significantly liberalized the rules for reduced rates in 2022. Since then: the standard rate must be at least 15 percent, there may be at most two reduced rates of at least 5 percent each, and for a few narrowly defined categories (such as books, food, or energy) a third super-reduced rate below 5 percent or even zero percent is permitted. Within these guardrails, each country sets its rates itself — and uses that leeway very differently.

Current 2026 VAT rates at a glance

The list below shows the standard and reduced rates in force (as of spring 2026). Rates can change at short notice — before issuing an invoice, always cross-check with the national tax authority or the EU's Taxes in Europe database.

• Germany: 19 percent standard rate, 7 percent reduced (food, books, local public transport, long-distance rail).
• Austria: 20 percent standard, 13 percent (e.g. plants, admissions, accommodation), and 10 percent (food, books, rent).
• Switzerland: 8.1 percent standard, 2.6 percent reduced (food, books), and 3.8 percent special rate (accommodation). Switzerland is not part of the EU and not bound by the EU VAT Directive — its rates are among Europe's lowest.
• Luxembourg: 17 percent standard (the lowest EU standard rate), 14 percent, 8 percent, and 3 percent as a super-reduced rate (books, certain foods).
• Hungary: 27 percent standard — the highest standard rate in the EU. Reduced rates of 18 percent (basic foodstuffs) and 5 percent (books, medicines, district heating).
• France: 20 percent standard, 10 percent (restaurants, accommodation), 5.5 percent (books, basic food, energy), and 2.1 percent super-reduced (prescription drugs, press).
• Spain: 21 percent standard (IVA general), 10 percent (accommodation, transport), and 4 percent super-reduced (bread, milk, books).
• Italy: 22 percent standard, 10 percent (accommodation, electricity), 5 percent (certain social services), and 4 percent super-reduced (basic food, books).
• Netherlands: 21 percent standard, 9 percent reduced (food, books, accommodation).
• Belgium: 21 percent standard, 12 percent (restaurants, social housing), and 6 percent (food, books, passenger transport).
• Denmark: 25 percent standard and no reduced rates — a deliberate policy choice with a single uniform VAT.
• Sweden: 25 percent standard, 12 percent (food, restaurants), and 6 percent (books, local public transport, cultural events).
• Poland: 23 percent standard, 8 percent (accommodation, restaurants), and 5 percent (basic food, books).
• Czech Republic: 21 percent standard and 12 percent reduced — in 2024 the country merged its previous two reduced rates into one.
• Norway: 25 percent standard, 15 percent (food), and 12 percent (accommodation, passenger transport, cinema). Norway is an EEA but not an EU member.

Why are the rates so different?

The most important reason is national tax sovereignty. Article 113 TFEU requires unanimity in the Council for tax harmonization in the EU — and unanimity among 27 member states is almost impossible on tax matters. Each country sticks to its own model: Denmark likes simplicity (one rate, no exceptions), France likes social policy (super-reduced rates for necessities), Luxembourg likes competitiveness (low rates to attract consumption from neighboring countries).

Add to that political reality: reduced rates on food, books, or energy ease the burden for low-income households and are domestically almost untouchable. Lower rates for hotels and restaurants are a tourism subsidy in Mediterranean countries (Spain, Italy, France, Greece). Higher rates on standard goods — as in Hungary or the Nordics — fund generous welfare systems. The EU Commission accepts all of this as long as the minimum rates and the list of eligible categories (Annex III of the directive) are respected.

Reverse charge: who owes the tax in B2B?

If a German entrepreneur sells a consulting service to a French company, in theory French VAT would apply because the service is deemed to take place at the recipient's seat. If the German actually charged French VAT, they would have to register for VAT in France. To avoid that bureaucracy, Article 196 of the EU VAT Directive provides for a shift of liability: the supplier issues a net invoice with the note 'Reverse Charge', and the French customer self-assesses the VAT in their own return and immediately deducts it as input tax — net zero.

The condition on both sides is a valid VAT identification number, which can be checked via the EU's VIES portal. Reverse charge generally applies to services between businesses in different EU countries, but in Germany it also applies in certain domestic situations — for example construction work, building cleaning, scrap deliveries, and some telecom wholesale cases. Caution: anyone who wrongly applies reverse charge still owes the tax and loses the input deduction at the customer's end.

One-Stop-Shop (OSS): the game changer for e-commerce

Until 2021, online sellers exceeding certain thresholds (Germany 100,000 euros, France 35,000 euros, etc.) in cross-border sales had to register for VAT and file returns in each destination country individually. Since 1 July 2021, that logic has been replaced by a single EU-wide threshold of 10,000 euros per year (for all B2C distance sales combined) and the One-Stop-Shop. Anyone exceeding the threshold registers once in their home country — in Germany at the Federal Central Tax Office — and reports all EU B2C turnover quarterly, with each destination country's VAT rate, via the OSS portal.

In practice: a Berlin-based Etsy shop selling jewelry to Italy, Spain, and France still has to charge 22 percent Italian, 21 percent Spanish, and 20 percent French VAT on its sales — but it reports everything in a single OSS return in Germany and pays one bundled liability. For digital services (streaming, software, e-books), the equivalent MOSS has existed since 2015 and was absorbed into OSS. Anyone selling less than 10,000 euros a year into other EU countries may continue to use their domestic rate — real relief for very small sellers.

Small business exemption 2026 (Germany)

Germany's small business exemption under section 19 UStG was substantially overhauled on 1 January 2025 and continues in that form for 2026. Until 2024, the limit was 22,000 euros prior-year turnover and 50,000 euros in the current year (forecast basis). Since 2025, the thresholds are 25,000 euros prior-year turnover and 100,000 euros in the current year — and crucially, the current-year limit is now a hard actual cap. The moment annual turnover crosses 100,000 euros, the exemption ends immediately, and from the next sale onward, VAT must be charged.

Anyone using the exemption writes invoices without VAT and must include a note on the invoice that no VAT is charged under section 19 UStG. In return, input tax deduction is lost — all purchases are gross costs. For service providers with low material costs this can be advantageous, for retailers with large stock purchases usually not. Anyone voluntarily opting out (electing standard taxation) is locked in for five years. Since 2025, the exemption also applies cross-border in the EU: small businesses can register for a simplified EU procedure and offer their services in other EU countries below the relevant national thresholds without VAT as well.

Brexit: the United Kingdom outside the OSS

Since the United Kingdom's withdrawal from the EU on 31 January 2020 and the end of the transition period at the end of 2020, the UK is treated as a third country from the EU's perspective. The UK VAT standard rate remains at 20 percent, the reduced rate at 5 percent (electricity, gas, children's car seats), and there is a zero rate for many foods, books, and children's clothing. Reverse charge and OSS no longer apply — a German business selling goods to UK private customers must register with HMRC and remit UK VAT when the consignment value does not exceed 135 GBP.

For shipments above 135 GBP, VAT is collected at import by the UK buyer, which can make the end price for the customer considerably higher. For services, the picture is mixed depending on the type of supply: B2B consulting is generally not subject to UK VAT (the reverse-charge logic continues under UK law), while B2C streaming is taxable either in the EU or in the UK depending on where the consumer is located. The post-Brexit complexity is one of the reasons many smaller EU online retailers dropped the UK market entirely after 2021.

Frequently asked questions

How do I convert between gross and net?

From net to gross, multiply by (1 + rate), so at 19 percent by 1.19. From gross to net, divide by the same factor — for 100 euros gross at 19 percent, that yields 100 / 1.19 = 84.03 euros net and 15.97 euros VAT. The most common everyday mistake: simply subtracting 19 euros of tax from 100 euros gross. That would give 81 euros net and is wrong, because 19 percent of 81 euros is only 15.39 euros, not 19. For a quick calculation, use a tool like our VAT calculator.

Which rate applies for a sale from Germany to Austria to a private customer?

If the company's total EU B2C distance sales stay below 10,000 euros per year, the German rate applies (typically 19 percent). Once the threshold is exceeded — which happens very quickly with active e-commerce — the Austrian rate applies (20 percent standard or 10/13 percent reduced, depending on the product). Reporting goes through the German One-Stop-Shop. Important: the 10,000-euro threshold is an EU-wide aggregate, not per country.

When am I not allowed to show VAT on the invoice at all?

In three main cases: (1) you use the small business exemption under section 19 UStG and are therefore exempt from VAT. (2) You provide a service to a business in another EU country and reverse charge applies — the invoice is net with a reference to the customer's VAT ID and the recipient's tax liability. (3) The supply is exempt under section 4 UStG (e.g. medical treatment, education, certain financial services). In all other cases, VAT must be shown — otherwise you owe it anyway under section 14c UStG.