More than 170 countries use a Value Added Tax or an equivalent Goods and Services Tax, making VAT the most widespread form of indirect taxation in the world. Standard rates run from 5% in parts of the Gulf to 27% in Hungary, and the countries that operate without any VAT-style system are a short list led by the United States, which relies on state-level sales taxes instead.
Europe
Every EU member state runs a VAT system under Council Directive 2006/112/EC, which sets a minimum standard rate of 15%.1Legislation.gov.uk. Council Directive 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax2European Commission. VAT Rates Above that floor, each country sets its own rates. Luxembourg is the lowest in the EU at 17%. Hungary charges 27%, the highest rate anywhere in the world. Most member states also apply one or more reduced rates to essentials like food, medicine, and public transport.
Outside the EU, the United Kingdom charges a 20% standard rate under the Value Added Tax Act 1994, with a registration threshold of £90,000 in taxable turnover over a rolling twelve-month period.3GOV.UK. VAT Rates4GOV.UK. How VAT Works – VAT Thresholds Norway applies 25%. Switzerland keeps its rate at 8.1%, the lowest in Europe.5Swiss Federal Tax Administration. Current Swiss VAT Rates Iceland and Turkey also operate their own VAT systems.
Asia and Oceania
China runs one of the world’s largest VAT systems, on a three-tier structure: 13% on most manufactured goods and imports, 9% on transportation and utilities, and 6% on modern services such as consulting and finance. The current system replaced a patchwork of older business taxes through reforms completed in 2016.
India launched its unified Goods and Services Tax on July 1, 2017, following the 101st Amendment to the Constitution. The reform merged central and state-level levies into a single framework administered by the GST Council.6Goods and Services Tax Council. The GST Council Rates fall into four main slabs, 5%, 12%, 18%, and 28%, depending on how the product or service is classified. Luxury goods and items the government considers harmful, including tobacco and aerated drinks, sit at 28% plus an additional compensation cess.
Japan’s Consumption Tax is 10%, with a reduced 8% rate on food and certain beverages introduced in October 2019 alongside the increase from the previous 8% headline rate.7Ministry of Finance Japan. Consumption Tax A qualified invoice system took effect in October 2023, requiring sellers to issue compliant invoices before buyers can claim input tax credits. South Korea applies a flat 10% VAT on most transactions.8Korea Legislation Research Institute. Value-Added Tax Act
Australia charges 10% GST on most goods and services. New Zealand charges 15% with very few exemptions, a broad-base design that tax policy experts often point to as one of the cleanest VAT systems in the world. Both countries use a credit-invoice mechanism that lets registered businesses reclaim the tax paid on their purchases.9Australian Taxation Office. Goods and Services Tax
Africa and the Middle East
South Africa charges a 15% standard rate under the Value-Added Tax Act 89 of 1991. The 2026 Budget Speech announced an increase in the mandatory registration threshold from R1 million to R2.3 million in annual taxable turnover. A proposed rate increase was politically contested and appears unlikely to take effect.10South African Revenue Service. Value-Added Tax Nigeria charges 7.5%, up from 5% in 2020. Kenya charges 16%, and Ghana charges 15%.
The Gulf Cooperation Council framework set a baseline 5% rate for member states. Saudi Arabia and the United Arab Emirates were the first to implement in 2018. Saudi Arabia later tripled its rate to 15% in 2020 during pandemic-era fiscal pressures. The UAE has held at 5%. Bahrain introduced VAT at 5% in 2019 and has since doubled its rate to 10%. Oman followed in 2021 at 5%. Kuwait and Qatar signed on to the regional framework but have not activated their VAT systems.
The Americas
Nearly every country in Central and South America collects a VAT, commonly called Impuesto al Valor Agregado (IVA). Mexico applies a 16% standard rate. Argentina charges 21%, with a reduced 10.5% rate on basic food items. Chile, Colombia, Peru, and Uruguay all operate their own VAT systems at rates between 12% and 22%.
Brazil began a sweeping consumption-tax overhaul on January 1, 2026, replacing five overlapping taxes with two new value-added taxes: the CBS, a federal contribution on goods and services, at an initial rate of 0.9%, and the IBS, a state and municipal tax, at 0.1%. These test rates run alongside the legacy taxes during a transition that stretches through 2032, with the old levies phased out by early 2033. The new system shifts tax collection to where goods are consumed rather than where they are produced.11Library of Congress. Brazil: Implementation of Tax Reform Begins
Canada collects a 5% federal Goods and Services Tax under the Excise Tax Act.12Government of Canada. Charge and Collect the Tax – Which Rate to Charge Several provinces combine this with their own provincial sales tax into a Harmonized Sales Tax, pushing the combined rate as high as 15%. A business must register once its worldwide taxable supplies exceed CA$30,000 over four consecutive calendar quarters, or if it crosses that mark within a single calendar quarter.13Government of Canada. When to Register for and Start Charging the GST/HST Canada also offers a GST/HST credit to lower-income individuals to offset the tax’s regressive impact.
Countries That Do Not Use VAT
The United States is the largest economy in the world without a national VAT. Instead, 45 states and the District of Columbia levy their own sales taxes. Five states charge no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.14Tax Foundation. State and Local Sales Tax Rates, 2026 Combined state and local rates run from 0% to roughly 9.5%. The structural difference from VAT matters: U.S. sales taxes apply only at the final retail sale and do not use the credit-invoice chain that lets businesses reclaim tax paid on their inputs.
Hong Kong imposes no VAT, GST, or sales tax, funding government through profits tax and stamp duties. Other jurisdictions that skip consumption taxes to stay competitive as financial or tourism hubs include the Cayman Islands, Bermuda, and the Maldives. Kuwait and Qatar remain the two GCC members that have not yet activated their planned VAT systems. These countries typically fund government operations through corporate taxes, import duties, natural resource revenues, or licensing fees.
Zero-Rated Goods Versus Exempt Goods
Almost every VAT country carves certain goods and services out of the standard rate, and the two main methods work very differently.
A zero-rated good is technically taxed, just at 0%. The seller charges no VAT to the customer but can still recover the VAT paid on inputs used to produce or deliver that good. The credit chain stays intact. Exports are the universal example: virtually every VAT system zero-rates exported goods so that domestic tax does not inflate the price in foreign markets. Many countries also zero-rate essentials such as basic food, children’s clothing, or prescription medicine.
An exempt good sits outside the VAT system entirely. The seller charges no VAT, but also cannot claim credits for VAT paid on inputs. That breaks the credit chain and effectively buries some tax in the final price. Financial services, residential rent, and medical care are commonly exempt. Businesses that sell a mix of taxable and exempt supplies can only recover input VAT proportionally, based on their taxable sales.
When a Foreign Seller Owes VAT
Selling internationally can trigger VAT registration in countries where you have no office and no employees. A few of the most common trip-wires:
The EU’s Import One-Stop Shop (IOSS) lets non-EU sellers collect VAT at checkout on goods valued at €150 or less shipped to EU consumers, and remit through a single registration in one member state.15European Commission. VAT e-Commerce – One Stop Shop The EU has announced plans to eliminate the €150 threshold by March 2028. Sellers storing inventory in EU warehouses or fulfillment centers already need local VAT registration in that member state, regardless of IOSS.
The UK’s £90,000 threshold applies to UK-based businesses. Non-established sellers often face a nil threshold, so VAT registration can be required from the first taxable sale.16GOV.UK. VAT: Increasing the Registration and Deregistration Thresholds This catches sellers who store goods in UK warehouses, use fulfillment centers like Amazon FBA, or ship directly to UK consumers. Online marketplaces that facilitate sales of goods already located in the UK are generally required to collect and remit the VAT themselves.
Since July 2021, Canada has required non-resident businesses supplying digital products, services, or platform-based short-term accommodation to Canadian consumers to register under a simplified GST/HST regime.17Government of Canada. Doing Business in Canada – GST/HST Information for Non-Residents Sellers of physical goods shipped into Canada from abroad follow different rules and may need standard registration depending on their fulfillment arrangements.
Refunds for Tourists
Many VAT countries allow tourists to reclaim the tax paid on goods purchased during their visit, provided the goods are exported unused. The basic steps are consistent across countries: request a tax-free form at the store, present the form and your purchases to customs before departing, and collect your refund at an airport counter or by mail. Each country sets its own minimum purchase amount and eligibility rules, and not every store participates. Hotel stays and restaurant meals are almost never eligible. The UK largely discontinued its VAT refund scheme for international visitors in 2021, though refunds may still be available in Northern Ireland under certain conditions. If you plan significant purchases abroad, ask the retailer about tax-free shopping before you buy, since you cannot retroactively claim goods bought at a non-participating shop.