International VAT Rate Round Up: December 2024

The December edition of our International VAT Rate Round Up highlights the latest updates from Bulgaria, Canada, Ecuador, Estonia, Guernsey, Latvia, and Vietnam.

Bulgaria

As confirmed in Bulgaria’s 2025 draft budget plan, the 9% reduced VAT rate for restaurants and catering services will not be extended beyond its current expiration date.

This reduced VAT rate was introduced in July 2020 as a temporary measure to support the hospitality industry during the pandemic.

However, with the 2025 budget, the government has decided not to continue this reduction, meaning that the VAT rate for restaurants and catering services will return to the standard rate after the measure ends.

Canada

On 23 October 2023, the Nova Scotia Finance and Treasury Board announced a reduction in the provincial portion of the Harmonized Sales Tax (HST), which will take effect in April 2025.

Currently, the HST in Nova Scotia consists of two parts:

• the federal Goods and Services Tax (GST) at 5%; and
• the provincial portion at 10%, for a total HST rate of 15%#

The provincial portion will decrease by 1%, resulting in a new HST rate of 14% after the change. This reduction aims to alleviate the tax burden on residents by lowering the combined sales tax rate in the province.

Ecuador

On 21 October 2023, the President issued Executive Decree No. 429, which announces a temporary reduction in the general VAT rate to 8% for all tourist services provided during the national holidays of All Souls Day and Independence of Cuenca, from 1 November to 4 November 2024.

The decree applies the VAT rate reduction to the following tourist services:

• Accommodation
  • Hotels, hostels, and other lodging services

• Food and Beverage Services
  • Restaurants, cafes, and other food-related services
• Transportation
  • Tourist-focused transport, including air, sea, river, land transportation, and vehicle rentals primarily used for tourism

• Travel Agency Transportation
  • When travel agencies provide their own transport services

• Tourist Intermediation and Event Organization
  • Services provided by tourist agencies, including events like congresses and conventions

• Casinos and Amusement Facilities
  • Services in casinos, game rooms (including bingo and mechanical games), racetracks, and amusement parks.

This VAT reduction is aimed at stimulating tourism during these key national holidays by making tourist services more affordable.

Estonia

The Estonian Tax and Customs Board has published an updated version of the Estonian VAT Return to reflect the VAT rate changes that will come into effect on 1 January 2025.

These changes affect the VAT rates for certain goods and services.

• Accommodation with breakfast:
  • The VAT rate will increase from 9% to 13%

• Press publications:
  • The VAT rate will rise from 5% to 9%

• Special Transitional Rules for Cash-Based VAT Accounting:
  • For businesses that use cash-based VAT accounting, there are special transitional rules to help manage the VAT rate changes

• Accommodation and accommodation with breakfast:
  • If the service was invoiced and provided before 1 January 2025, businesses can still apply the old 9% VAT rate, even if the payment is received after 1 January 2025

• Press publications:
  • If the invoice was issued and the press publication was sent or made available before 1 January 2025, businesses can continue to apply the old 5% VAT rate, even if payment is received after the rate change

These transitional rules are in place until 31 December 2026, allowing businesses additional time to adjust to the new VAT rates without being penalized for invoices issued before the rate changes take effect.

Guernsey

After several attempts to introduce a Goods and Services Tax (GST), the Guernsey Government has voted in favour of introducing the tax in 2027.

The proposed GST rate might be 8%, which is higher than the previously discussed rate of 5%.

This decision is a significant step toward implementing the tax, which has been debated for some time.

Further actions and decisions related to the GST implementation are expected after the elections in June 2025, where more details on the exact structure and timeline of the tax introduction may be finalized.

Latvia

The 50% VAT deduction for purchasing and leasing passenger cars, including related expenses for maintenance, repair, and fuel, not wholly used for business purposes, is set to expire on 31 December 2024.

However, Latvia has requested an extension of this measure.

On 15 May 2024, Latvia formally requested a three-year extension for this VAT deduction, and on 11 September 2024, the European Commission confirmed it had received all the necessary information to evaluate the request.

Subsequently, on 23 October 2024, the Commission issued a proposal to extend the measure until 31 December 2027.

This proposal is awaiting approval by the Council of the European Union and should be published in the Official Journal once approved.

The special measure applies to passenger cars with a maximum authorized weight of no more than 3500 kg and up to 8 seats, excluding the driver’s seat. Cars used for certain activities are excluded from the restriction on VAT deduction and are treated according to the normal rules. These exemptions include:

• Cars purchased for resale, hire, or lease;
• Cars used for passenger transportation (e.g., taxis) or for goods transportation;
• Cars used for driving lessons;
• Cars used in guard or emergency services;
• Cars used as demonstration vehicles for car sales.

Vietnam

The 8% VAT rate was extended by the Government until June 30, 2025, as per the newly drafted Resolution.

However, certain goods and services are excluded from this reduced VAT rate, meaning they will remain subject to the standard VAT rate (likely 19%, or the applicable higher VAT rate).

Excluded Goods and Services from the 8% VAT Rate:

• Telecommunications;
• Information Technology;
• Financial Activities;
• Banking;
• Securities;
• Insurance;
• Real Estate Trading;
• Metals and Products from Prefabricated Metals;
• Mining Products (Excluding Coal Mining);
• Coke and Refined Petroleum;
• Chemical Products.

Stay Up to Date with Our VAT Newsletter

To ensure you remain informed about the latest VAT news, trends, and topics from around the globe, subscribe to our VAT Newsletter. Each month, we deliver insightful updates straight to your inbox, helping you stay ahead of the curve.

Partner with Real VAT Experts

With decades of experience in VAT compliance and consultancy, our team at Taxback International stands ready to assist you. We offer comprehensive expertise across all countries and languages where VAT obligations exist.

International VAT Rate Round Up: November 2024

If you missed out on our November VAT rate announcements of VAT threshold changes, you can catch up now.

Taxback International

Taxback International’s innovative tax technology and experienced tax professionals to provide VAT Compliance and VAT Reclaim services to global businesses. Find out more about our range of technologies:

Comply: End-to-end VAT Compliance Platform

VATConnect: VAT Reclaim Platform

TBI Pay: Global Payments Solution