Which country does not levy sales tax?

VAT in other countries

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VAT and sales tax

Most countries impose a value added tax or similar tax on goods and services of all kinds. However, the taxes sometimes work differently, and tax rates also fluctuate considerably - which can pose certain challenges to foreign travelers.

In the EU

Within the EU, things are still relatively simple: all EU countries levy VAT, and VAT works in the same way in all EU countries; this facilitates trade within the community, i.e. between the individual EU countries. Internationally, the value added tax is called Value-added tax (VAT), meaning "tax added to the value".

Each country is largely free to determine its own VAT rates. The EU only stipulates that the regular tax rate must be at least 15% and the reduced tax rate at least 5%, and that a zero rate may also be applied; Which tax rate applies to which goods and services is up to the federal states. As a result, the same method is used in every EU country, but the amount of VAT is very different. Luxembourg has the lowest regular tax rate with 17%, the highest Hungary with 27%. With a regular 19%, Germany comes off relatively favorably in an EU comparison (→ VAT rates in Germany). In addition to the regular and the reduced VAT rate, many EU countries have one or more other reduced rates for certain goods and services. Denmark is the only EU country that does not use reduced tax rates at all.

Outside of the EU

Similar tax systems are also widespread in many other countries, with more or less major differences to the value added tax or VAT system of the EU. In most countries, including the EU, vital things such as (fresh) food, medical care and education are subject to a reduced tax rate, or even completely tax-free. Some examples:

In Australia VAT works essentially like in the EU, but is called here Goods and services tax (GST), literally translated as "goods and services tax".

In Japan Businesses determine their VAT liability by adding up their gross receipts and subtracting all of their eligible expenses (including input tax). The remaining difference is used to calculate VAT. In most other countries, on the other hand, VAT is reported on invoices and companies add up how much VAT they have received and paid as input tax.

The United States use a Sales tax, a "tax on sales". This follows the same principle as VAT - a tax on goods and services borne by the consumer - but works differently: The sales tax is only added to the net price when it is sold to the consumer and paid by the seller to the state . Sales tax is only levied once at the very end of a production chain and not (like VAT) for each individual production step. That sounds a lot easier at first; However, every company has to prove that it does no Consumers are in order not to have to pay sales tax. In addition, there is no uniform tax rate in the USA, instead each state sets its own sales tax. Counties and municipalities can determine additional tax rates that are added, which can result in very different final sales tax rates in different locations around the United States. Unlike in the EU, in the US the store usually only shows the net price (excluding tax) of the goods. The sales tax is only added at the checkout, i.e. customers only find out here what they are actually paying (including tax).

Canada again uses a hybrid form: Here there is a value added tax (as in Australia Goods and services tax), with a uniform tax rate set by the state. And there are so-called Provincial sales taxes, i.e. sales taxes that are set by the individual provinces and also collected by them. When selling to consumers, both taxes are added together and added to the net sales price; In Canada, too, the net prices are usually found in stores.

Countries without VAT

In addition to all the countries that levy a value-added tax or an analog tax on goods and services, there are still countries that do not. The British overseas territories of Bermuda, Cayman Islands, Turks and Caicos Islands and the British Virgin Islands, for example, have no VAT or the like, which are not only fantastic holiday destinations, but are also all tax havens.

In Saudi Arabia and the United Arab Emirates VAT has only been levied since 2018, in Bahrain since 2019. The other two Gulf states, Kuwait and Qatar, also want to introduce it in the coming years. The smallest country in the world is different: The Vatican City basically waives VAT; and in contrast to the "secular" countries, this is probably also a good thing here.

Read on: Helgoland: Island without VAT