EUR-Lex Access to European Union law

Back to EUR-Lex homepage

This document is an excerpt from the EUR-Lex website

The EU’s common system of value added tax (VAT)

The EU’s common system of value added tax (VAT)



Directive 2006/112/EC — the EU’s common system of value added tax (VAT)


It recasts and repeals the original sixth value added tax (VAT) directive, to clarify the EU’s VAT legislation currently in force.


VAT is applied to all transactions carried out in the EU for payment by a taxable person, i.e. any individual or body that supplies goods and services in the course of business. Imports by any person are also subject to VAT.

Taxable transactions include supplies of goods or services within the EU, intra-EU acquisitions of goods (goods supplied and dispatched or transported by a business in one EU country to a business in another) and imports of goods into the EU from outside.

  • The rules regarding the place of taxation depend on the nature of the transaction, the kind of product supplied and whether transport is involved:
    • supply of goods — where the goods are supplied;
    • intra-EU acquisition of goods — where the party acquiring goods has them delivered, i.e. the EU country where the goods are finally located after transport from another EU country;
    • imports of goods — usually the EU country where they arrive;
    • supply of services — where the services are supplied. This depends not only on the nature of the service supplied but also on the status of the customer receiving the service. To ensure that the service is taxed at the place where it is actually used, there are some exceptions to these general rules, such as:
      • services connected with immovable property (real estate);
      • passenger transport;
      • activities relating to culture, sport, education and entertainment;
      • restaurant services.
  • VAT is charged when the goods or services are supplied according to the nature of the transaction. VAT may be charged for an intra-EU purchase when the supply of goods to the relevant EU country is completed. For imports into the EU, VAT is charged when the goods are brought into an EU country.
  • The taxable amount for supply of goods and services and the intra-EU acquisition of goods includes all payments to the supplier. Where goods are imported, this amount is their value for customs purposes. Duties, taxes and other charges are included in the taxable amount but the VAT itself, price discounts and rebates granted to the customer are excluded.
  • The standard rate of VAT to be applied by all EU countries to goods and services is at least 15%. EU countries may apply one or two reduced rates of at least 5% to specific goods or services listed in Annex III to the directive. A number of exceptions to these rules (lower rates, reduced rates on other goods or services, etc.) also apply under certain conditions.
  • The directive allows for exemptions from VAT. Most of these are exemptions without the right to deduct, e.g. financial and insurance services, medical care or social services. However, exemptions with the right to deduct also exist, e.g. intra-EU supplies of goods or exports of goods to a non-EU country. The majority of exemptions are obligatory for EU countries, but some are optional.
  • A taxable person has the right to deduct the amount of VAT paid on acquired goods or services in the EU country where these transactions are carried out. This input VAT can be deducted from VAT payable on taxed transactions, e.g. domestic supplies of goods or services. There is in general no right to deduct in the case of an economic activity that is exempt from VAT, or if the taxable person applies certain special schemes. In certain cases, deductions may be limited or adjusted.
  • The directive sets out the obligations of taxable and certain non-taxable persons. Generally, VAT is payable by any taxable person making a taxable supply of goods or services. Exceptions include specific transactions where the customer pays VAT, e.g. supplies of natural gas, and transactions where the EU country may choose to designate the customer to pay VAT, as with certain fraud-sensitive supplies.
  • The directive permits variations, known as derogations, by EU countries from standard VAT rules, e.g. to prevent certain types of tax evasion. There are also special VAT schemes designed to reduce paperwork, e.g. for small businesses and for farmers.
  • In addition, it allows EU countries that are most severely affected by VAT fraud to temporarily apply a generalised reversal of VAT liability. This involves shifting liability for paying the VAT from the supplier to the customer. EU countries may use this measure only for domestic supplies of goods and services above a threshold of €17.500 per transaction, only until 30 June 2022, and under very strict conditions.


It has applied from 1 January 2007 and had to become law in the EU countries by 1 January 2008.


For more information, see:

  • VAT (European Commission).


Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006, pp. 1-118)

Successive amendments to Directive 2006/112/EC have been incorporated into the basic text. This consolidated version is of documentary value only.


Council Directive (EU) 2018/2057 of 20 December 2018 amending Directive 2006/112/EC on the common system of value added tax as regards the temporary application of a generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold (OJ L 329, 27.12.2018, pp. 3-7)

Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (OJ L 268, 12.10.2010, pp. 1-18)

See consolidated version.

Council Directive 2009/132/EC of 19 October 2009 determining the scope of Article 143(b) and (c) of Directive 2006/112/EC as regards exemption from value added tax on the final importation of certain goods (OJ L 292, 10.11.2009, pp. 5-30)

Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State (OJ L 44, 20.2.2008, pp. 23-28)

See consolidated version.

Council Directive 2007/74/EC of 20 December 2007 on the exemption from value added tax and excise duty of goods imported by persons travelling from third countries (OJ L 346, 29.12.2007, pp. 6-12)

Council Directive 2006/79/EC of 5 October 2006 on the exemption from taxes of imports of small consignments of goods of a non-commercial character from third countries (codified version) (OJ L 286, 17.10.2006, pp. 15-18)

last update 15.04.2019