Many countries have more than one VAT rate. A reduced rate is a VAT rate that’s lower than a country’s standard VAT rate. They’re used for several reasons:
Like standard VAT rates, reduced rates are different in every country. The amount and what they cover change from state to state. The difference between what is standard and reduced rated can be very small. For example, in the UK, gingerbread men are zero-rated unless they have more chocolate than two dots for eyes. In that case, the standard VAT rate applies (20%).
Charging the right VAT rate is a part of selling compliantly. If you undercharge, you’ll owe the tax authority the standard rate, even though you didn’t collect that money from your customer. Overcharging will make it hard to compete with the correctly rated products and might lead to a situation where you have to refund your customers' money.
If you’re not sure what VAT rate to charge in what country, we can help you work it out. If you give us your commodity codes our experts will find the legal precedent for the VAT rate you should charge in each country. Book a call with us to get a quote.
- To make essential goods and services (like food) more affordable
- To help protect and promote culturally significant products
- To stimulate specific industries
Like standard VAT rates, reduced rates are different in every country. The amount and what they cover change from state to state. The difference between what is standard and reduced rated can be very small. For example, in the UK, gingerbread men are zero-rated unless they have more chocolate than two dots for eyes. In that case, the standard VAT rate applies (20%).
Charging the right VAT rate is a part of selling compliantly. If you undercharge, you’ll owe the tax authority the standard rate, even though you didn’t collect that money from your customer. Overcharging will make it hard to compete with the correctly rated products and might lead to a situation where you have to refund your customers' money.
If you’re not sure what VAT rate to charge in what country, we can help you work it out. If you give us your commodity codes our experts will find the legal precedent for the VAT rate you should charge in each country. Book a call with us to get a quote.