2016 VAT rate changes

Mon 4th Jan 2016

Below is a summary of the main VAT and GST rate changes around the world in 2016.

2016 EU VAT rate changes

The only major change in EU VAT rates was the long-promised reduction in the Romanian VAT rate from 24% to 20%. It will fall again to 19% in 2017 if the economy continues to improve. Poland and Italy both delayed their proposed cuts and rises, respectively, till 2017.

Reduced VAT rates were raised in a number of European Union member states. Austria created a new 13% rate, and moved hotel accommodation up from April 2016. Belgium raised its reduced VAT rate on public supplies of electricity to help pay for a cut in labour taxes. Slovakia did manage a cut in its reduced VAT rates on food.

The disparity on VAT rates between printed and e-books remains a contentious issue. France was forced into raising its rate from 5.5% to 20% following a March 2015 European Court of Justice (ECJ) ruling that e-books should be subject to the higher, standard VAT rate. Italy has challenged this by cutting its e-book VAT rate from 22% to 4%. Poland has also asked the ECJ to review its decision.

Global VAT rate changes in 2016

Norway raised its reduced VAT rate on hotels and public transport to pay for a corporation tax rate cut.  Albania gave its hotel industry a boost with a reduced VAT rate.

Sri Lanka reshuffled its VAT rates, including a new, higher standard rate of 12.5%. Brazil hiked its ICMS (VAT on financial services transactions) in a bid to back-stop falling tax revenues.

India looks set to miss its latest deadline of 1 April 2016 for the revamp of its antiquated VAT regime with the imposition of a simplified Goods and Services Tax. The best hope of the implementation date of the much-anticipated new GST regime is late 2016 or even 2017. Similarly, Egypt faces another delay on the withdrawal of its sales tax for a modernised VAT system. Puerto Rico has also stalled on a VAT implementation, instead hiking its existing sales and use tax from 7% to 11.5%.  Fiji passed a VAT rate cut to 9%.  Trinidad & Tobago also has plans to reduce its VAT rate from 15% to 12.5% in February.

China looks set to complete the 3-year reform of its VAT system by July 2016.