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Value added tax

VAT is a consumption tax that the seller of goods or services will add to the price. The seller thus collects this tax from customers to remit it to the state. Liability to pay VAT concerns anyone who sells goods and services, rents out goods, or is engaged in similar commercial operations on an ongoing basis.

Goods is defined not only as tangible property, commodities and goods but also electric power, gas, energy for purposes of heating and cooling and other similar purposes. The definition of services refers to everything else that can be supplied or sold in the course of business.

VAT is payable each time a sale of goods or services occurs. However, VAT is designed to be paid by the consumer. For this reason, the seller has the right to deduct the input VAT of his purchases of goods and services for business purposes, if another VAT taxpayer has supplied them to him. In this way, the VAT that is included in the actual consumer prices is only the VAT of the last seller in the supply chain.

Registration for VAT is mandatory

If a company operates a business for which VAT is payable, requesting for VAT registration will be mandatory. However, no registration is required if turn over for the accounting period (12-month) stays below €8,500. The company with turn over below €8,500 can voluntarily be VAT registered if it operates its business commercially on an ongoing basis.

Some sectors have been left outside the scope of VAT taxation. These sectors are expressly listed in the law and they include selling real property and apartments or flats in housing companies, healthcare services, and social services. If a business company only sells these goods or services, it will not be deemed liable to pay VAT.

Rates of VAT

General rate of VAT, effective for most goods and services

24 %

Food, animal feed, restaurant services, meal catering services

14 %

Books, medicine, services relating to physical exercise and sports, movies, entrance to cultural events and to entertainment events, transport of passengers, accommodation, and TV licenses.

10 %

To figure out the amount to add to the net price, the seller should multiply the tax base (= the net price without VAT) with the applicable rate. Tax base is the price payable by the buyer, in which no VAT is included.

VAT taxpayers have reporting and payment obligations

If a company is entered in VAT register, it will be expected to submit Periodic tax returns to report all VAT information for each taxable period. Furthermore, it will be expected to remit the amount of VAT payable to the Tax Account system. The frequency of submitting Periodic tax returns and making payments is dependent on the agreed length of reporting periods. The alternatives are monthly, quarterly and yearly. To work out VAT payable, subtract the total input VAT on monthly purchases from the sum total of VAT that has been added to the prices of sold goods and services during the month.

VAT Special Scheme

Starting 2015, suppliers must pay VAT in the customer's country of residence when they sell telecommunications, broadcasting and electronically provided services.


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Glossary

Go to Glossary to look up important tax concepts and terminology.

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Last Update: 1/1/2013