Understanding VAT in the EU: A Comprehensive Guide

Navigating VAT rules in the EU can be complex for freelancers, small businesses, and cross-border service providers. The European Union has a cohesive VAT framework, but each member state sets its own VAT rates and rules.

What are the VAT rules in the EU and Why It Matters

Value‑Added Tax (VAT) is an indirect consumption tax applied to most goods and services in EU member states. While the EU provides a general legal framework through the VAT Directive, each country determines its own VAT rates and how they apply to specific goods or services.

Why VAT matters:

• Misapplying VAT can lead to financial penalties or legal trouble.

• Correct VAT handling helps with cash flow and avoids overcharging or undercharging clients.

• Understanding VAT across the EU enables you to expand your business internationally more confidently.

INLIS Consulting provides expert guidance to help freelancers, startups, and small businesses navigate VAT in multiple EU jurisdictions.

The EU-Wide VAT Framework

According to EU law:

• There is a minimum standard VAT rate of 15%, though member states are free to go higher.

• Countries may also apply reduced rates (as low as 5%) for certain goods/services and even super-reduced rates (< 5%) or exemptions for essential categories.

• These reduced / super-reduced rates are typically reserved for essentials like food, books, medicines, or social services.

VAT Rates Across EU Countries, Country-by-Country Overview

Here’s a breakdown of standard VAT rates in key EU countries, helping you understand how VAT differs across the Single Market:

EU Country	Standard VAT Rate (2025)	Additional Comments / Reduced Rates
Austria	20%	Reduced rates: 10%, 13%
Belgium	21%	Reduced: 6% and 12%
Bulgaria	20%	Reduced: 9%
Croatia	25%	Reduced: 5%, 13%
Cyprus	19%	Reduced: 5%, 9%
Czech Republic	21%	Reduced: 10%, 15%
Denmark	25%	No reduced rate for many categories
Estonia	24%	Reduced: 9%
Finland	25.5%	Reduced: 10%, 14%
France	20%	Reduced: 5.5%, 10%; Super-reduced: 2.1%
Germany	19%	Reduced: 7%
Greece	24%	Reduced: 6%, 13%
Hungary	27%	Reduced: 5%, 18%
Ireland	23%	Reduced: 9%, 13.5%; Super‑reduced: 4.8%
Italy	22%	Reduced: 5%, 10%; Super-reduced: 4%
Latvia	21%	Reduced: 5%, 12%
Lithuania	21%	Reduced: 5%, 9%
Luxembourg	17%	Reduced: 8%, 14%; Super-reduced: 3%
Malta	18%	Reduced: 5%, 7%
Netherlands	21%	Reduced: 9%
Poland	23%	Reduced: 5%, 8%
Portugal	23%	Reduced: 6%, 13%
Romania	21%	Reduced: 5%, 11%
Slovakia	23%	Reduced: 5%, 19%
Slovenia	22%	Reduced: 5%, 9.5%
Spain	21%	Reduced: 10%, 4%
Sweden	25%	Reduced: 6%, 12%

How VAT Rules Apply in Cross-Border Business Scenarios

When you operate across EU borders (or invoice clients in different EU countries), here’s how VAT rules in the EU typically apply, and how INLIS Consulting can help you manage them:

1. B2B (Business-to-Business) within the EU

   • If you invoice a business in another EU country and they have a valid VAT ID, you usually do not charge local VAT. Instead, the reverse charge mechanism applies.

   • The client will account for VAT in their own country.

   • It’s crucial to validate their VAT number — INLIS Consulting can assist with this.

2. B2C (Business-to-Consumer) within the EU

   • For private individuals in other EU countries, you generally must charge VAT at your own country’s rate, since the reverse charge doesn’t apply.

   • Example: A Portuguese freelancer selling to a private customer in Germany charges Portuguese VAT (23%) if that is their country's rate.

3. Digital Services & the One Stop Shop (OSS)

   • If you provide digital or electronic services (e.g., online courses, software) to EU consumers, you may need to register for the OSS (One Stop Shop).

   • OSS allows you to declare and pay VAT for multiple EU countries via a single return, simplifying compliance.

Key Compliance Tips for EU VAT

• Always check the client’s VAT status: Validating the VAT ID prevents mistakes.

• Invoice carefully: For reverse charge, include the client’s VAT ID and a note that “VAT is reverse-charged.”

• Use local VAT rates: Know your country’s standard, reduced, or super‑reduced rate to apply the correct VAT.

• Maintain detailed records: Keep invoices, proof of client location, and VAT declarations well organized.

• Leverage professional help: VAT across the EU is complex — partnering with a consultancy like INLIS Consulting helps you stay on track.

Why INLIS Consulting Is Your Partner for EU VAT

At INLIS Consulting, we offer:

• Expert guidance on EU VAT rules and how they apply to your specific business model

• Assistance with VAT registration, OSS registration, and cross-border invoicing

• Compliance support to reduce risk, avoid penalties, and optimize your cash flow

• Customized advice depending on your country of residence, the countries of your clients, and the types of services you provide

Conclusion

VAT in the EU is not “one-size-fits-all.” Each member state has its own rates and rules, making it essential to understand the VAT landscape across the EU. With INLIS Consulting, you can confidently invoice clients across the EU, apply the correct VAT treatment, and remain fully compliant.

Contact INLIS Consulting today to tailor a VAT strategy that works for your cross-border business.