The August 2026 edition of our International VAT Rate Round Up sees a number of significant VAT and GST developments worldwide, with governments continuing to use indirect tax policy to address inflationary pressures, support key industries and encourage economic growth.
Read the latest VAT rate updates from Sweden, Peru, Sri Lanka, Thailand, Uzbekistan and Kenya
VAT rate changes by region
Europe
Sweden – Temporary VAT reduction on food
Previous rate: 12%
New rate: 6%
Effective date: 1 April 2026 to 31 December 2027
Sweden has introduced a temporary VAT reduction on food products, reducing the applicable rate from 12% to 6%. The reduced rate applies to most food and non-alcoholic beverages intended for human consumption, including bottled drinking water, low-alcohol beverages, food supplements not classified as medicines, prepared foods sold by grocery retailers, takeaway meals collected by customers, and ingredients sold for food preparation. The measure forms part of a broader government initiative aimed at supporting household purchasing power and reducing the cost of living.
Restaurant and catering services remain subject to 12% VAT, while alcoholic beverages continue to attract the standard 25% VAT rate. The measure is scheduled to remain in place until 31 December 2027.
Sweden – VAT reduction on cultural and nature attractions
Previous rate: 25%
New rate: 6%
Effective date: 1 July 2026
Effective from 1 July 2026, Sweden reduced VAT on admission charges for selected cultural, entertainment and tourism activities from 25% to 6%. The reduction applies to admission fees for concerts, theatre productions, operas, ballets, dance events, zoological parks and certain natural attractions, including national parks, nature reserves and Natura 2000 sites. The measure significantly reduces indirect tax costs for qualifying operators and aligns treatment with other cultural activities already benefiting from reduced VAT rates.
Americas
Peru – Extension of temporarily reduced rate on restaurants and accomodation services
New rate: 8% IGV extended through 2026; 12% IGV during 2027
Effective date: Extension applies through 31 December 2026; 12% applies during 2027
Some VAT rate changes are expected in Peru in the coming years. These changes result from two different laws issued in the past.
- Law No. 31556 of 2022, supporting small and micro businesses engaged in the tourism and hospitality sector
- Law No. 32387 of 16 June 2025, restructuring the IGV and IPM components of VAT.
The measure adopted in 2022 allows businesses within its scope to apply a temporary reduced IGV (Impuesto General a las Ventas) rate of 8%, provided certain conditions are met:
- Main activity is: restaurants, hotels, tourist accommodations
- Receive (70%) of their income from the above activity
- Who are micro or small businesses
- Who are not part of an economic group and have no ties with foreign companies.
This measure was originally due to expire 31 December 2024. However, the government extended the reduced rate through Law No. 32219 as follows:
- For 2025: applicable IGV rate of 8%
- For 2026: applicable IGV rate of 8%
- For 2027: applicable IGV rate of 12%.
The Municipal Promotion Tax (IPM) is not within the scope of the above Laws, so the 2% IPM is added to the reduced 8% IGV rate, resulting in an applicable VAT rate of 10% for 2025.
The restructuring of the IGV and IPM components of VAT, adopted in 2025, does not change the overall VAT rate of 18%, but results in a change to the temporarily reduced rate applicable to restaurants and accommodation services, due to the modification of the IPM rate.
The table below presents the effect of both Laws on the overall VAT rates:
| Year 2026 | IGV | IPM | VAT (IGV + IPM) |
| Standard | 15.5% | 2.5% | 18% |
| Reduced | 8% | 2.5% | 10.5% |
| Year 2027 | |||
| Standard | 15% | 3% | 18% |
| Reduced | 12% | 3% | 15% |
| Year 2028 | |||
| Standard | 14.5% | 3.5% | 18% |
| Reduced | Will cease to exist if not further extended | ||
| Year 2029 | |||
| Standard | 14% | 4% | 18% |
Asia-Pacific
Sri Lanka – VAT on financial services increased
Previous rate: 18%
New rate: 20.5%
Effective date: 1 July 2026
Sri Lanka has increased the VAT rate applicable to financial services from 18% to 20.5% through VAT (Amendment) Act No. 14 of 2026. The increase applies from 1 July 2026 and affects financial institutions operating within the scope of the country’s financial services VAT regime. While the VAT registration thresholds remain unchanged at LKR 15 million per quarter or LKR 60 million annually, the higher rate increases the indirect tax burden for banks, insurers, finance companies and other taxable financial service providers.
Thailand – Reduced VAT rate extended
Extended rate: 7% maintained until 30 September 2027
Effective date: Extension announced 27 July 2026
Thailand extended the reduced VAT rate of 7% through September 2027. This extension, in addition to supporting economic growth, is the current uncertain situation in the Middle East, which may lead to increased transportation costs and consumer goods prices. Without future extension, the rate will revert to 10% from October 2027.
Uzbekistan – New optional VAT regime
Effective date: 1 June 2026
Uzbekistan has adopted Presidential Decree No. UP-100 introducing tax incentives and administrative simplifications for small businesses. Small businesses operating in food service, retail and services sectors may elect a simplified 6% VAT regime without input VAT recovery rights. A proposal was also put forward to raise the threshold for small businesses transitioning to the general tax regime from 1 billion to 5 billion soums. These measures entered into force on 1 June 2026. The optional 6% VAT regime will remain available until 1 January 2030.
Middle East & Africa
Kenya – Reduced VAT on fuel extended
Previous rate: 16%
New rate: 8%
Effective date: Extension until 14 October 2026
On 14 July 2026, Kenya extended the reduced VAT rate on gasoline, kerosene, and diesel from 16% to 8% in response to fuel price pressures on consumers. The measure originally took effect on 15 April 2026 for an initial period of 90 days. Under the Legal Notice, the Cabinet Secretary may extend the application of the reduced rate for a further 90-day period. Legal Notice No. 128 exercises this authority and extends the reduced VAT rate until 14 October 2026.
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Authors
Lisa Dowling
Specialising in International VAT Compliance solutions, Lisa brings a wealth of knowledge and insight in her dealings with a host of international clients ranging from start-ups through to multinationals. With 24 years VAT experience behind her, Lisa has managed VAT compliance issues and solutions globally for over 14 years. Fintua have 12,000 + corporate clients in over 109 countries and many of these are members of the Fortune 500.
