International VAT Rate Round Up: October 2025

Global VAT reform continues to accelerate, with many countries introducing new rate structures, tightening compliance and adjusting policies to support fiscal stability and economic growth.

Here’s a summary of the most notable updates from India, Ireland, the Netherlands, Peru, Russia, Switzerland and Thailand.

India 

The Central Board of Indirect Taxes & Customs (CBIC) has issued FAQ-2 addressing key questions on GST rates and input tax credit (ITC) related to accommodation and restaurant services, following the rate restructuring effective 22 September 2025.

GST rate on hotel accommodation (Unit ≤ Rs 7,500/day)

• Hotel accommodation services priced at Rs 7,500 or less per unit per day are now subject to a mandatory 5% GST rate, without the option to avail Input Tax Credit (ITC)
• Previously, suppliers could opt to charge 18% with ITC, even on lower-priced rooms, depending on their business model. This option is no longer available.

Input Tax Credit (ITC) restrictions

• For suppliers (hotels): Must reverse ITC on inputs used to provide accommodation services under the 5% concessional rate; these supplies are treated similarly to exempt supplies for ITC purposes.
• For recipients (customers): No ITC can be claimed on such accommodation invoices, even if the invoice is in the company’s name and the stay is for business travel. This applies regardless of the recipient’s GST registration status.

Hotels/accommodation providers must apply 5% GST without ITC on rooms ≤ Rs 7,500/day and reverse ITC on related inputs.
Business travellers/companies cannot claim ITC on such bookings, even if used for business purposes and booked in the company’s name. Businesses may need to reconsider vendor selection or travel policies if reclaiming GST is a factor.

GST rate restructuring

The GST Council approved a major overhaul of the Goods and Services Tax (GST) rate structure during its 56th meeting held on 3 September 2025.

The previously complex 4-tier tax rate system will be replaced with a simplified 2-rate structure – the 12% and 28% rates have been removed.

• Standard Rate (18%): General goods and services. Excluding items specified under the merit or luxury categories
• Merit Rate (5%): Essential foods and items, certain drugs, medicines and medical devices

Some goods will be subject to zero-rated GST:

• Certain special foods such as Indian bread and lifesaving drugs and medicines

Some luxury goods will be subject to 40% GST:

• Sugary drinks, tobacco products, aircraft for personal use, yachts and other pleasure or sports vessels

Changes in GST rates on services will be effective from 22 September 2025.

GST rate changes for all goods, except specified tobacco and related products, will be effective from 22 September 2025.

The Union Finance Minister and GST Council Chairperson will decide the actual date for transitioning these products to the new GST rates.

The rate rationalisation aims to simplify the GST structure, improve compliance and align tax rates with economic priorities.

Ireland

On 7 October 2025, the Department of Finance published the Budget 2026: Taxation Measures, including several significant updates to VAT policy aimed at addressing energy costs, housing supply and support for specific sectors.

Key VAT measures include:

• Extension of 9% VAT rate on gas and electricity extended until 31 December 2030. This measure continues to provide cost-of-living relief for households and businesses amid ongoing energy price pressures.
• Reduced VAT rate on food, catering and hairdressing effective 1 July 2026
• 9% VAT on new apartments from 8 October 2025 to 31 December 2030 to support housing supply.

Netherlands

On 16 September 2025 (Budget Day), the Dutch government presented the 2026 Tax Plan to the House of Representatives, confirming key decisions on VAT rates affecting the cultural, media, sport and hospitality sectors.

Reduced VAT rate (9%) maintained

• Applies to cultural, media & sport services, including digital publications, museum admissions and artistic performances
• The proposed increase to 21% has been reversed
• This move supports cultural accessibility and digital media while ensuring affordability for consumers

VAT on accommodation services to increase

• Effective 1 January 2026, the VAT rate on accommodation services will increase from 9% to 21%
• This increase will affect hotels, guesthouses and similar short-stay accommodation services
• The increase aligns these services with the standard VAT rate, aiming to simplify the VAT structure
• Accommodation providers should prepare for price adjustments, system updates and possible impact on demand due to the VAT increase.
• Finance and tax teams should ensure invoicing and accounting systems are updated to reflect the rate changes from 1 January 2026.

Peru 

On 16 June 2025, the Congress of the Republic of Peru published Law No. 32387 in the Official Gazette, confirming a restructuring of VAT components, effective 1 January 2026. 

Total VAT remains unchanged at 18%, but the composition is being revised. 

Currently: 

• IGV (General Sales Tax) is 16%  
• IPM (Municipal Promotion Tax) is 2% 

From January 2026: 

• IGV (General Sales Tax) will be 14%  
• IPM (Municipal Promotion Tax) will be 4% 

The shift aims to strengthen fiscal decentralisation by increasing the share of VAT revenues allocated to local governments. 

It supports the Municipal Compensation Fund (FONCOMUN), promoting: 

• Local infrastructure and services 
• Balanced regional development 
• Greater autonomy and financial capacity for municipalities, particularly in remote and underserved areas. 

VAT rate remains 18%, but breakdown between IGV and IPM must be updated in systems and documentation. 

Businesses must ensure that VAT components on invoices reflect the new structure from 1 January 2026. 

Russia 

The Russian Ministry of Finance announced that it has submitted to the Government a package of legislative bills, including the draft Federal Budget for 2026 and the planning period of 2027 and 2028.
Among the proposed measures are significant changes to VAT legislation, aimed at increasing budget revenues and tightening VAT compliance.

• Standard VAT rate: Increase from 20% to 22%
• Reduced rate (10%): Retained for essential goods including food products, medicines and medical devices, goods for children)
• VAT registration threshold lowered from 60 million RUB to 10 million RUB

Impact:

• More small and medium enterprises may be required to register for VAT due to the lower threshold
• Consumers may experience slightly higher prices due to the 2% increase in VAT, though essential goods remain protected
• Tax Authorities broader tax base and higher compliance oversight likely required.
• These proposals are subject to parliamentary approval as part of the broader 2026 budget package.
• If enacted, the changes would likely take effect from 1 January 2026.

Switzerland 

On 19 August 2025, the Federal Finance Administration (FFA) published the Budget Plan for 2026, which includes a medium-term financial and task planning outlook for 2027–2029. The Swiss Parliament is considering a further VAT increase of 0.5% in 2027. The measure is part of broader discussions tied to the financing of the 13th AHV pension (Old Age and Survivors’ Insurance). 

The increase would be in addition to any VAT changes already implemented or scheduled in prior fiscal plans. To ensure sustainable funding of the 13th AHV pension, the government is exploring fiscally neutral options, including raising indirect taxes. 

VAT is viewed as a broad-based and efficient revenue source, making it a primary candidate for this purpose. The VAT increase is still under consideration and would require formal legislative approval. 

Further details (including rate specifics, exemptions, or transitional measures) will likely follow in the legislative process leading up to Budget 2027. 

Thailand 

On 14 September 2025, the Thai government published Royal Decree No. 799 B.E. 2568 (2025) in the Royal Gazette, confirming the extension of the reduced VAT rate. 

The current VAT rate of 7% (inclusive of local taxes) has been extended until 30 September 2026. If not extended further, the VAT rate will revert to 10% on 1 October 2026. The reduced 7% VAT rate was first introduced on 1 October 2017 as a temporary measure to support the economy. 

Since then, it has been extended multiple times. The latest extension, through Royal Decree No. 799, is intended to stimulate domestic consumption and support continued economic growth in line with national targets.

Key Takeaways

The final quarter of 2025 marks a busy period for VAT reform worldwide. Countries are moving toward simplified rate structures, fiscal decentralisation, and targeted reliefs for energy and essential sectors.
Businesses should monitor implementation timelines closely and update systems, invoices and compliance processes well ahead of 2026.

International VAT Rate Round Up: September 2025

If you missed last month’s VAT rate announcements or VAT threshold changes, you can catch up now.

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