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



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


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


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

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

  • The place of taxation depends on the nature of the transaction, the kind of product supplied and whether transport is involved:
    • supply of goods — where the goods are supplied;
    • acquisition of goods between EU countries — where the goods are delivered, i.e. the EU country where the goods finally arrive after transport from another EU country;
    • imports of goods — usually the EU country where they arrive;
    • supply of services — where the services are said to be supplied. This depends not only on the type of service supplied but also on the type of customer receiving the service. The general rule is that a service is taxed at the place of the customer, if it is a business, or at the place of the supplier, if the customer is a private individual. 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 acquisition of goods between EU countries 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 amountfor supply of goods and services and the acquisition of goods between EU countries 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 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. medical care, social services or financial and insurance services. However, exemptions with the right to deduct also exist, e.g. supplies of goods between EU countries or exports of goods to a non-EU country. Most exemptions are compulsoryfor EU countries, but some are optional.
  • A taxable person may deduct the amount of VAT paid on acquired goods or services used for taxed transactions in the EU country where these goods or services are acquired. 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. services provided to a business by a supplier in another country, and transactions where the EU country may choose to designate the customer to pay VAT, as with certain fraud-sensitive supplies.
  • The directive permits exceptions 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 supplies of goods and services in their own country of more than €17,500 per transaction, only until 30 June 2022, and under very strict conditions.

A number of amendments have been made to Directive 2006/112/EC, including some amendments due to the COVID-19 pandemic.

  • Directive (EU) 2020/284 amends the directive, introducing certain requirements on payment service providers to keep records of e-commerce cross-border payments . The data will then be made available to national tax authorities under strict conditions, including those related to data protection. These requirements apply from 1 January 2024.
  • Amending Directive (EU) 2020/285 introduces simplified rules to reduce the administrative burden and compliance costs for small businesses and to create a more advantageous tax environment to help them grow and trade across borders more efficiently. Small businesses will be able to qualify for simplified VAT compliance rules where their annual turnover remains below a threshold set by the EU country concerned, which cannot be higher than €85,000. Under certain conditions, small businesses from other EU countries, which do not exceed this threshold, will also be able to benefit from the simplified scheme, if their total annual turnover in the whole of the EU does not exceed €100,000. These new rules apply from 1 January 2025.
  • The VAT e-commerce package (Directives (EU) 2017/2455 and (EU) 2019/1995 both amending Directive 2006/112/EC) introduced new simplifications for companies carrying out cross-border sales of goods or service. It ensures that VAT on such supplies is paid correctly to the EU country of the customer, in line with the principle of taxation in the EU country of destination. The first measures entered into force in 2015 and covered only telecommunications, broadcasting and electronic (TBE) services. Businesses providing business-to-consumer (B2C) supplies of TBE services in the EU can now declare and pay VAT in a simplified system (Mini One Stop Shop — MOSS).
  • As a consequence of the COVID-19 outbreak, Decision (EU) 2020/1109 postpones the date of entry into force of the second package from 1 January 2021 to 1 July 2021 to allow EU countries and businesses to have more time to prepare for the new rules.
  • Directive (EU) 2020/1756 amends Directive 2006/112/EC, following the United Kingdom (UK)’s withdrawal from the EU, introducing VAT identification numbers in Northern Ireland with a specific prefix to distinguish between:
    • taxable persons and non-taxable legal persons whose transactions involving goods in Northern Ireland are subject to EU VAT legislation; and
    • persons carrying out other transactions for which they are identified for VAT purposes in the UK.
  • Directive (EU) 2020/2020 amends the directive to ensure more affordable access to supplies of COVID-19 vaccines and in vitro diagnostic medical devices (test kits) in response to COVID-19 in Europe. From 12 December 2020 until 31 December 2022, it allows EU countries to:
    • exempt from VAT with the right to deduct the supply of COVID-19 vaccines and in vitro diagnostic medical devices, and services closely related to these vaccines and devices;
    • apply a reduced rate of VAT to COVID-19 in vitro diagnostic medical devices and related services, as is already the case for vaccines.


It has applied since 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) 2020/2020 of 7 December 2020 amending Directive 2006/112/EC as regards temporary measures in relation to value added tax applicable to COVID-19 vaccines and in vitro diagnostic medical devices in response to the COVID-19 pandemic (OJ L 419, 11.12.2020, pp. 1-4)

Council Directive (EU) 2020/285 of 18 February 2020 amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises and Regulation (EU) No 904/2010 as regards the administrative cooperation and exchange of information for the purpose of monitoring the correct application of the special scheme for small enterprises (OJ L 62, 2.3.2020, pp. 13-23)

Council Directive (EU) 2020/284 of 18 February 2020 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers (OJ L 62, 2.3.2020, pp. 7-12)

Council Directive (EU) 2019/1995 of 21 November 2019 amending Directive 2006/112/EC as regards provisions relating to distance sales of goods and certain domestic supplies of goods (OJ L 310, 2.12.2019, pp. 1-5)

See consolidated version.

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 25.01.2021