Global VAT Changes for 2025: What You Need to Know at the start of  the New Year

As we start 2025, significant changes to Value Added Tax (VAT) systems worldwide are set to take effect. These reforms will impact businesses and consumers, particularly in areas like electronic invoicing and tax rates. It is essential to understand these updates to ensure compliance and adapt effectively to the evolving global tax landscape.

I. VAT UPDATES IN 2025

Finland

Finland raised its VAT rate to 25.5% in September 2024. Starting January 2025, new goods and services will be subject to a reduced VAT rate of 14%.

Switzerland

Switzerland will adjust its VAT system, including changes to tax exemptions. A new reduced rate of 2.6% will be introduced, and online platforms will be treated as sellers for VAT purposes, affecting e-commerce transactions.

Slovakia

Slovakia will raise its VAT rate from 20% to 23%, and the existing reduced rate of 10% will be replaced by a new 19% rate, effective January 2025.

Netherlands

As part of broader tax reforms, the VAT rate on agricultural products, including non-food grains and legumes, will increase in 2025.

Spain

Spain’s temporary zero VAT rate on basic food products (which ended in September 2024) will be replaced by a 2% VAT rate, rising to 4% in 2025.

Estonia

Estonia will raise its VAT on accommodation services and newspapers, with a planned increase in the standard VAT rate from 22% to 24% in July 2025.

II. ELECTRONIC INVOICING CHANGES

Romania

Starting January 2025, Romania will mandate electronic invoicing for B2B transactions, requiring businesses to report all transactions electronically to improve efficiency and transparency.

Germany

Beginning in January 2025, German companies will be required to process electronic invoices in a machine-readable format, enhancing transparency and streamlining VAT reporting.

Latvia

Latvia will implement mandatory electronic invoicing for B2G transactions in 2025, followed by B2B invoicing in 2026.

Spain

Spain will introduce its invoicing system by July 2025, though a postponement to January 2026 is expected. This system aims to boost VAT compliance.

Malaysia

In Malaysia, the second phase of mandatory e-invoicing will begin in January 2025, applying to businesses with annual revenues exceeding 25 million MYR.

III. NEW RULES FOR DIGITAL ECONOMY AND ONLINE PLATFORMS

Switzerland

New regulations will treat online platforms as the sellers for VAT purposes. These platforms will be responsible for VAT on goods sold, both domestically and internationally, affecting both B2B and B2C transactions.

IV. ECONOMIC NEXUS RULES

United States (Louisiana)

Starting January 2025, Louisiana will raise its sales tax from 4.45% to 5%, extending the tax to include digital goods and services such as e-books and games.

Indonesia

Indonesia will increase its VAT rate from 10% to 12% in 2025, aligning with some of the highest VAT rates in Southeast Asia, bringing the country on par with the Philippines.

V. SMALL BUSINESS VAT REGIMES

European Union

The EU will update VAT rules for small businesses, allowing eligible enterprises to benefit from VAT exemptions when trading across member states. This will streamline cross-border transactions within the EU.

VI. PLACE OF SUPPLY RULES

Illinois (United States)

Starting January 2025, Illinois will update its rules for determining where sales tax applies. Tax will be calculated based on the delivery address of goods within the state, rather than the seller’s location.

VII. OTHER TAX CHANGES

Guinea-Bissau

From January 1, 2025, Guinea-Bissau will replace its existing 19% sales tax with a VAT system, introducing new VAT rates of 19%, 10%, and 5% for different categories of goods and services.

As 2025 approaches, businesses must stay informed about VAT updates in various countries to ensure compliance and adapt to these changes. The introduction of e-invoicing and VAT reforms will have a significant impact on business operations, making it crucial to understand these developments and prepare accordingly.