VAT Rate Round Up

International VAT Rate Round Up: October 2024

The October edition of our International VAT Rate Round Up highlights the latest updates from Croatia, Estonia, India, Ireland, Montenegro, Peru, Portugal, Slovakia, South Africa, and Thailand.

Croatia

The 50% deduction of VAT for the purchase and lease of passenger cars, including the purchase of all goods and services supplied in relation thereto (rental, fuel, repairs, spare parts, parking) not used exclusively for business purposes, is to expire on 31 December 2024.

  • On 3 April 2024, Croatia requested a further three-year extension of the measures;
  • On 15 May 2024, the Commission notified Croatia that it had all the information it considered necessary for appraisal of the request;
  • On 9 September 2024, the Council of the European Union issued a proposal of a decision extending the measures until 31 December 2027

The decision, when approved, shall apply from 1 January 2025.

Passenger cars covered by this measure are motor vehicles intended for the transport of persons with a maximum of eight seats in addition to the driver’s seat.

If passenger cars are used for certain specific activities, they are excluded from the restriction to the right to deduct and are treated under the normal rules:

  • vehicles used for the training of drivers;
  • vehicle testing, repair services;
  • an economic activity involving the transport of passengers and goods, the transport of deceased or rent; and
  • vehicles purchased for the purpose of resale.

Similar derogations in relation to the right of deduction have been granted to other Member States (Estonia, Italy, Latvia, Hungary, Poland, and Romania).

Estonia

On 10 September 2024, on the Riigikogu website, a draft bill 492 OE was published.

This draft bill is proposing a 5% reduced VAT rate on foodstuff and restaurant and catering services.

The bill is currently at the first reading stage and there are no comments mentioned on the effective date yet.

In 2023, several bills on reducing the VAT rate for foodstuff were rejected.

India

The Government of India have announced changes in GST according to the “No. 12/2024 – Central Tax” published in New Delhi on the 10 July 2024:

  • Businesses must now report supplies exceeding ₹1 lakh (approximately € 1,080) in their GSTR-1 under the B2CL (Business to Customer Large) table, down from the previous threshold of ₹2.5 lakhs;
  • Taxpayers can now report negative liability in GSTR-3B, which will be automatically carried forward to the next month;
  • Taxpayers who have not added or validated their bank account details in the GST system will have their GSTR-1 or IFF (for those in the Quarterly Return Monthly Payment scheme) blocked, preventing further filings until the issue is resolved;
  • E-invoicing is mandatory for all B2B transactions for businesses with a turnover exceeding ₹10 crores (approximately € 1 Million); and
  • The forms for filing annual returns (GSTR-9) and reconciliation statements (GSTR-9C) for the FY 2023-24 will be available on the GST portal. The deadline for submission is 31 December 2024.

Ireland

On the 1 October 2024, Budget 2025 was announced.

Some changes relating to VAT rates include:

  • The VAT rate on heat pumps will be reduced to 9%; and
  • The reduced VAT rate of 9% on gas (excluding gas as fuel) and electricity will be extended to 30 April 2025.

Montenegro

On 5 September 2024, the Government of Montenegro published its Fiscal strategy for the period 2024-2027, including the introduction of an intermediate VAT rate of 15%.

The new rate is planned to be applied to the following goods and services (currently subject to the 7% reduced VAT rate):

  • books, monographs and serials;
  • accommodation services in hotels, motels, tourist resorts, boarding houses, camps, tourist apartments and villas;
  • services of preparing and serving food, beverages and beverages, except alcoholic beverages, carbonated and non-carbonated beverages with added sugar and coffee in establishments for the provision of catering services;
  • copyright and services in the field of education, literature and the arts;
  • copyright in the field of science and art subjects;
  • services charged by means of tickets, other than those for which VAT exemption is prescribed;
  • services for the use of sports facilities for non-profit purposes, services provided in marinas;
  • solar panels; and
  • hairdressing services.

Peru

By Decreto Legislativo N° 1623 published in the Official Gazette on 24 August 2024 Peru amended their VAT Law by expanding the scope of VAT to digital services and intangible goods provided by non-residents.

The VAT rate is currently 18%.

According to the law the initial effective entry into force was 1 October 2024. The implementation of the Peru VAT Legislative Decree No. 1623 is postponed to 1 December 2024.

Portugal

From 1 October 2024, the reduced VAT rate in Madeira will reduce from 5% to 4%.

The reduced VAT rate in Madeira applies to a wide range of goods and services, such as:

  • hotel accommodations;
  • restaurants;
  • cultural events; and
  • passenger transportation.

Slovakia

The Slovak Government is planning changes in the VAT rates in the next year:

The standard VAT rate will increase from 20% to 23%.

The reduced VAT rate will increase from 10% to 19%.

The 5% VAT rate will remain the same.

Basic foodstuffs with a VAT rate of 10% will reduce to 5%.

Some rate restructuring is being considered for the below:

  • Energy;
  • Medicines;
  • Textbooks; and
  • Accommodation and services in the tourism industry.

The changes are still missing a legal regulation draft and subsequent approval.

South Africa

Starting from 1 September 2024, 15% VAT is applied to all B2C imports, removing the previous exemption for consignments under 500 rand.

This change aims to level the playing field for local sellers, who already charge 15% VAT.

The 20% flat customs duty remains in place.

Thailand

On 19 September 2024, the Thai Revenue Department published Royal Degree Nr 790 B.E. 2567 (2024) concerning the reduction of the VAT rate.

The Degree extends the application of the 7% rate (including local taxes) until the end of September 2025.

If not extended again, from the 1 October 2025, the rate will revert back to 10%.

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