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Reduced VAT Rate
A lower VAT rate applied to specific categories of goods and services deemed socially or culturally important, such as food, books, and medical goods. EU reduced rates range from 5% to 15%.
Reduced VAT rates are lower rates that EU member states may apply to specific categories of goods and services. Under EU Directive 2006/112/EC, reduced rates must be at least 5% and can only apply to categories listed in Annex III of the directive. Common reduced-rate categories include food products, pharmaceutical goods, books and publications, and cultural and sporting events.
Common Reduced-Rate Categories
| Category | Examples | Typical Rate |
|---|---|---|
| Food products | Groceries, non-alcoholic drinks (for home consumption) | 5% – 10% |
| Books and publications | Physical books, e-books, newspapers, magazines | 5% – 10% |
| Medical and pharmaceutical | Medicines, medical devices, disability aids | 5% – 10% |
| Cultural and sporting events | Museum entry, cinema tickets, sporting events | 5% – 13.5% |
| Accommodation | Hotel stays, short-term rental | 7% – 13.5% |
| Passenger transport | Local buses, trains (short distances) | 5% – 10% |
Note
SaaS subscriptions and digital services do NOT qualify for reduced rates in any EU member state — they always fall under the standard rate. Reduced rates apply to physical goods and specific, legislated categories.
Reduced Rates by Country (Examples)
| Country | Reduced Rates |
|---|---|
| France | 10%, 5.5%, 2.1% |
| Ireland | 13.5%, 9%, 4.8% |
| Italy | 10%, 5%, 4% |
| Germany | 7% |
| Netherlands | 9% |
| Spain | 10%, 4% |
Frequently asked questions
What is the minimum reduced VAT rate allowed in the EU?
The minimum reduced rate under EU Directive 2006/112/EC is 5%. Some member states have super-reduced rates below 5% (e.g., 2.1% in France), which are allowed as legacy provisions.
Do digital products qualify for a reduced VAT rate?
Generally no. E-books and digital publications are an exception in some countries (e.g., France, Germany, Netherlands). But software, SaaS, API access, and general digital services always fall under the standard rate.
How do I know if my product qualifies for a reduced rate?
Check whether your product category is listed in Annex III of EU Directive 2006/112/EC and whether the specific member state has chosen to apply a reduced rate to that category. When in doubt, apply the standard rate — overclaiming a reduced rate is a compliance risk.
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Related terms
Standard VAT Rate
The default VAT rate applied to most goods and services in a country, ranging from 17% (Luxembourg) to 27% (Hungary) across EU member states.
VAT Exemption
A VAT exemption means a transaction is not subject to VAT, either without the right to deduct input VAT (exempt without credit) or with full input VAT recovery (zero-rated).