World

2025 VAT Rate Increases: Slovakia, Israel, Estonia & More

December 1, 2024

As the end of 2024 approaches and countries worldwide adopt Budget Plans for 2025, governments are considering many amendments to national VAT rules and regulations in that process. However, several national governments have already adopted and announced some VAT changes.

While countries like Guinea-Bissau are implementing a VAT system to replace the existing taxes, others are making less elaborate changes, such as changing their VAT rates. However, these changes are not insignificant and impact all taxable persons operating in those countries.

Changes to Standard VAT Rates

In October, the Slovakian government announced the decision to change VAT rates, which includes increasing the standard VAT rate by 3% from January 1, 2025. Therefore, the new 23% standard VAT rate will replace the current 20%.

Israel is another European country that announced the increase in the standard VAT rate, which will become effective from the beginning of 2025. An 18% standard VAT rate will replace the currently effective VAT rate of 17%.

2024 marks a significant year for Estonia as VAT rates have been amended. The Estonian government increased the standard VAT rate to 22% from the previous 20%. However, a further increase of 2% was announced for the summer of 2025. Therefore, from mid-2025, the standard VAT rate in Estonia should be 24%.

We move from Europe to Asia, where Indonesia continues its plan to increase VAT rates, which was defined in 2021. The VAT rate was first increased to 11% in 2022 and will be further increased to 12% starting from 2025.

Conclusion

These are just some of the examples of changes in VAT rates around the world. In addition to these changes to standard VAT, many countries, such as Ireland, Germany, Spain, the United Kingdom, Finland, and Poland, will implement changes in the applicable rules of reduced and zero VAT rates.

However, as the Budget Plans are still being discussed nationally, additional changes might be announced in the following months.

Source: VATabout - Slovakia – Government to Implement Notable Changes to VAT Rates, Cabinet Secretariat of The Republic of Indonesia, PwC - Israel, Estonian Ministry of Finance

Could more VAT changes be announced for 2025?

Yes, as national Budget Plans for 2025 are still being finalized, additional VAT rate changes or amendments may be announced in the coming months.

Will these VAT changes affect reduced and zero VAT rates?

Yes, countries like Ireland, Germany, Spain, the UK, Finland, and Poland are expected to implement changes to reduced and zero VAT rates in addition to standard rate adjustments.

Are there VAT changes planned outside of Europe?

Yes, Indonesia will raise its VAT rate to 12% in 2025 as part of a phased plan initiated in 2021.

What is Estonia’s plan for VAT rate changes in 2025?

Estonia increased its VAT rate to 22% in 2024, and another increase to 24% is scheduled for mid-2025.

When will Slovakia’s VAT rate increase take effect?

Slovakia’s VAT rate will increase from 20% to 23%, effective January 1, 2025.

What countries are increasing their VAT rates in 2025?

Countries like Slovakia, Israel, Estonia, and Indonesia are increasing their VAT rates. Slovakia will raise its rate to 23%, Israel to 18%, Estonia to 24%, and Indonesia to 12%.