Basic 21% VAT rate is average compared with Europe

Prague, Jan 13 (CTK) - The basic value added tax {VAT} rate of 21 percent in the Czech Republic is at an average level compared with the other European Union countries, while the reduced Czech VAT rate of 15 percent is among the highest in the EU, according to a study written by analysts from bank Ceska sporitelna (CS).

Despite a hike in the basic VAT rate to 21 percent in the Czech Republic as of January 2013, the rate is still lower than in 1993 when a 23 percent VAT was introduced in the country.

A number of European countries have often changed their VAT rates in recent years. The basic VAT rate is the highest in Hungary (27 percent) and the lowest in Luxembourg (15 percent).

The trend of raising indirect taxes has been recorded in many EU countries in recent years, CS's analysts said.

The basic VAT rate is now the highest in Hungary where it reaches 27 percent. In 2008, the country had the basic rate at 20 percent.

"Since 2000, basic VAT rate has most often been changed in Portugal and Ireland - five times in each state," Jan Jedlicka of CS said.

In seven EU member states - Austria, Belgium, Bulgaria, Denmark, France, Luxembourg and Sweden - no change in the basic VAT rate has been made since at least 2000.

"In the remaining 20 states approximately two changes on average have been made in the period from 2000 to 2013. The biggest number of changes was made in 2009 and 2010," CS's analysts said.

Apart from the Czech Republic, two VAT rates also exist in the neighbouring countries, that is Slovakia (10 percent and 20 percent), Germany (7 percent and 19 percent) and Austria (10 percent and 20 percent).

In Poland two reduced VAT rates are in effect. An 8 percent rate applies to selected foodstuffs, some medical goods and newspapers, while books and periodicals except for newspapers are subject to a 5 percent tax. The basic VAT rate in Poland is 23 percent.

"The Czech Republic and the neighbouring states are among countries where the basic vat rate is just below the EU's average," Jedlicka said.

Two or three VAT rates are usually used in the EU, CS said in its analysis. The exception is Denmark which has a single 25 percent VAT rate. However, some goods are exempt from tax in Denmark.

Luxembourg has four VAT rates. Its basic 15 percent rate is the lowest in the EU.

A super reduced VAT rate, that is a rate lower than 5 percent, is in effect in France, Ireland, Italy, Luxembourg and Spain.

Value added tax was introduced in the Czech Republic on January, 1993. Until December 31, 1992 goods were subject to a turnover tax.

"An interesting fact is that the newly introduced basic VAT rate (23 percent) in 1993 was the highest and the reduced rate (5 percent) was the lowest in the existence of the independent Czech Republic," Jedlicka said.

Under the current EU regulations, the basic VAT rate cannot be lower than 15 percent. EU member states can implement one or two reduced rates, but the rates cannot be lower than 5 percent.

But the EU's regulations also permit member states to use a reduced rate lower than 5 percent for a temporary period.

VAT in EU as of January 2013:

Basic rate Super reduced rate Reduced rate
Austria 20 10
Belgium 21 6.12
Bulgaria 20 9
Cyprus 17 5.8
Czech Republic 21 15
Denmark 25
Estonia 20 9
Finland 24 10.14
France 19.6 2.1 5.5/7
Germany 19 7
Great Britain 20 5
Greece 23 6.5/13
Hungary 27 5.18
Ireland 23 4.8 9/13.5
Italy 21 4 10
Latvia 21 12
Lithuania 21 5.9
Luxembourg 15 3 6.12
Malta 18 5.7
Netherlands 21 6
Poland 23 5.8
Portugal 23 6.13
Romania 24 5.9
Slovakia 20 10
Slovenia 20 8.5
Spain 21 4 10
Sweden 25 6.12

Source: Ceska sporitelna