Countries around the world have been introducing various fiscal measures to counteract the economic distress caused by COVID-19. One measure—among many others—has been to make changes to Value-Added Taxes (VAT), such as delaying payments, speeding up refunds, or reducing rates. These measures can provide great relief for many businesses and in some cases for consumers as well.
However, it is important to keep in mind that—mainly to reduce compliance and administrative costs—most countries have VAT exemption thresholds: If a business is below a certain annual revenue threshold, it is not required to participate in the VAT system. This means that such small businesses—unlike businesses above that threshold—do not collect VAT on their outputs sold to customers but also cannot receive a refund for VAT they paid on business inputs.
Due to such VAT exemption thresholds, many small businesses will not be able to benefit from the VAT changes that are being introduced to provide relief during this crisis. For example, VAT payment extensions and interest-free late payments—such as discussed or implemented in Austria, Estonia, and the Netherlands—won’t provide relief for businesses that are below the threshold.
The following map looks at VAT exemption thresholds in European OECD countries.
The United Kingdom has the highest VAT exemption threshold, at €96,840 (US $108,412). Switzerland and France follow, at €89,900 ($100,643) and €82,800 ($92,695). Spain and Turkey are the only two countries that do not have a threshold, meaning that all businesses are in the VAT system.
|Annual Revenue Threshold below which VAT Collection Is Not Mandatory|
|Austria (AT)||EUR 30,000||€ 30,000||$ 33,585|
|Belgium (BE)||EUR 25,000||€ 25,000||$ 27,988|
|Czech Republic (CZ)||CZK 1,000,000||€ 38,960||$ 43,616|
|Denmark (DK)||DKK 50,000||€ 6,700||$ 7,501|
|Estonia (EE)||EUR 40,000||€ 40,000||$ 44,780|
|Finland (FI)||EUR 10,000||€ 10,000||$ 11,195|
|France (FR)||EUR 82,800||€ 82,800||$ 92,695|
|Germany (DE)||EUR 17,500||€ 17,500||$ 19,591|
|Greece (GR)||EUR 10,000||€ 10,000||$ 11,195|
|Hungary (HU)||HUF 8,000,000||€ 24,600||$ 27,540|
|Iceland (IS)||ISK 2,000,000||€ 14,570||$ 16,311|
|Ireland (IE)||EUR 75,000||€ 75,000||$ 83,963|
|Italy (IT)||EUR 65,000||€ 65,000||$ 72,768|
|Latvia (LV)||EUR 40,000||€ 40,000||$ 44,780|
|Lithuania (LT)||EUR 45,000||€ 45,000||$ 50,378|
|Luxembourg (LU)||EUR 30,000||€ 30,000||$ 33,585|
|Netherlands (NL)*||EUR 1,345||€ 1,345||$ 1,506|
|Norway (NO)||NOK 50,000||€ 5,070||$ 5,676|
|Poland (PL)||PLN 200,000||€ 46,980||$ 52,594|
|Portugal (PT)||EUR 10,000||€ 10,000||$ 11,195|
|Slovak Republic (SK)||EUR 49,790||€ 49,790||$ 55,740|
|Slovenia (SI)||EUR 50,000||€ 50,000||$ 55,975|
|Sweden (SE)||SEK 30,000||€ 2,870||$ 3,213|
|Switzerland (CH)||CHF 100,000||€ 89,900||$ 100,643|
|United Kingdom (GB)||GBP 85,000||€ 96,840||$ 108,412|
Source: OECD, Under Taxes on Consumption, “VAT/GST: Registration/Collection Thresholds (2019),” http://www.oecd.org/tax/tax-policy/tax-database/.
Notes: Except the Netherlands, all countries covered allow businesses below the threshold to register and account voluntarily for VAT. This gives small businesses the option to avoid the disadvantages of non-registration but also increases their compliance and administrative costs.
*In the Netherlands, the basis for calculating the VAT exemption threshold is not the annual revenue but the net annual VAT due.
An overview of VAT relief and other fiscal measures that countries around the world have implemented during the coronavirus outbreak can be found here.
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