International VAT Rate Round Up: May 2025

The May edition of our International VAT Rate Round Up highlights the latest updates from Croatia, Ecuador, Ireland, Lithuania, Netherlands, and South Africa

Croatia

The Croatian Parliament has approved the extension of the 5% reduced VAT rate on natural gas and heating supplies until 31 March 2026. 

The decision was finalised at the end of March and published in the Official Gazette (Narodne Novine 52/2025). 

The reduced rate benefits both citizens and businesses, and applies to the supply of: 

• Natural gas 

• Heating from thermal stations 

• Heating wood, pellets, briquettes, and wood chips 

This measure forms part of Croatia’s continued efforts to mitigate energy costs and support households and industry through sustained tax relief on essential heating fuels. 

Ecuador

Under Executive Decree No. 594, issued on 11 April 2025, the President announced a temporary reduction of the general VAT rate from 15% to 8% on all tourist services provided during the Easter holiday period from 18 to 20 April. 

This measure is in line with the President’s constitutional authority to apply temporary tax reductions during national or local holidays, including adjacent weekends, for a total of up to 12 days per year.  

The 2025 quota has now been fully used, distributed as follows: 

• 5 days during the New Year’s holidays 

• 4 days during Carnival in March 

• 3 days during Easter (18–20 April) 

The VAT Reduction Applies to the Following Tourist Services: 

• Accommodation 

• Food, beverages, and entertainment 

• Tourist agency services 

• Tourist transportation 

• Organisation of events, including congresses, conventions, meetings, incentives, fairs, and exhibitions 

• Convention centers, reception halls, and banquet halls 

• Tourist guidance services 

• Community tourism centers 

• Theme parks and permanent attractions 

• Spas, hot springs, and tourist recreation centers 

This targeted tax relief is part of a broader strategy to support the tourism sector during key holiday periods and stimulate domestic economic activity. 

Ireland

The Department of Finance announces that the Government has agreed to extend the application of the reduced 9% VAT rate on energy—specifically on the supply of electricity and gas used for domestic or industrial heating or lighting—until 31 October 2025. 

Originally due to expire at the end of April 2025, the temporary VAT reduction will remain in effect for an additional six months. 

From 1 November 2025, the VAT rate on these supplies will revert to the standard 13.5%. 

The 9% VAT rate was first introduced on 1 May 2022 as a temporary measure in response to rising energy costs and has been extended multiple times since. 

In the scope of the 9% VAT Rate: 

• Supply of electricity 

• Supply of gas used for domestic or industrial heating or lighting (gaseous or liquid form) 

Exclusions from the Reduced Rate: 

• Vehicle gas 

• Liquefied petroleum gas (LPG) used as a propellant 

• Gas used for welding or cutting metal 

• Gas sold as lighter fuel 

Lithuania

On 17 May 2024, a draft amending Article 19 of the Lithuanian VAT Law was published on the Seimas of the Republic of Lithuania website, with registration number 25-6750. 

The proposed amendments introduce changes to the VAT rates, including the introduction of a new reduced VAT rate of 12%. 

The new 12% VAT rate will replace the current 9% VAT rate for certain services, including: 

• Accommodation services 

• Passenger transport services 

• Attendance at art and cultural establishments and events 

Printed and electronic books, along with non-periodical publications, will move to a super-reduced VAT rate of 5%. 

This change aligns the taxation of these items with printed and electronic periodical publications, which already benefit from the 5% VAT rate. 

For most other items currently taxed at the 9% rate, the draft law does not specify a new reduced rate (either 5% or 12%). Therefore, these items will likely be taxed at the standard VAT rate of 21% unless further changes are made. 

The changes, if adopted, will come into effect on 1 January 2026. 

Netherlands

On 17 April 2025, the Government published the Spring Memorandum 2025 on its official website.  

The Memorandum provides an update on the current year’s budget and outlines initial plans for 2026 and beyond. 

As part of its ongoing efforts to combat inflation and support household spending, the Government announced the reversal of the previously planned VAT increase on media, sports, and cultural events that was scheduled to take effect in 2026. 

The Minister of Finance has dismissed the possibility of increasing the reduced 9% VAT rate to 21%, stating that such a proposal will be permanently abolished.  

South Africa

On 24 April 2025, the Minister of Finance introduced the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill [B 14—2025], which proposes to maintain the VAT rate at 15%, reversing the previously announced increase to 15.5% set out in the March Budget. 

This reversal was reinforced by an order issued by the Western Cape High Court on 27 April, officially suspending the 0.5% VAT increase from 1 May 2025. 

Key Compliance Instructions for VAT Vendors (Effective 1 May 2025): 

• Cease all development or implementation efforts related to the 15.5% VAT rate. 

• Vendors must charge VAT at 15%, not 15.5%, in accordance with the VAT Act. 

• Vendors facing system constraints may temporarily apply the 15.5% rate until adjustments are completed—no later than 15 May 2025. 

• Transactions incorrectly charged at 15.5% must be reported in: 

• Field 12 (Output Tax) 

• Field 18 (Input Tax) of the VAT return. 

• Any 0.5% VAT adjustments—whether as refunds to customers or recoveries from suppliers—must also be reported in fields 12 and 18, respectively. 

• VAT return declarations will be used in verifications and audits for the affected tax periods. 

• From 1 May, VAT returns will automatically calculate VAT at 15% for relevant periods. 

• Vendors who already implemented the 15.5% rate or made zero-rating adjustments are encouraged to reverse those changes before 1 May 2025. 

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International VAT Rate Round Up: April 2025

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