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The main EU VAT legislation

The main legislation relating to the common European VAT system, which the national VAT legislation of each EU country must comply with, is Directive 2006/112/EC (OJ L 347). This legislation is often referred to as the Principal VAT Directive (PVD). The PVD sets out the VAT rules applicable to all EU countries and it also sets out where there is flexibility for each EU country to make its own decisions in relation to VAT.

Which territories are affected by EU VAT?

The EU VAT territory is made up of 27 member states. In certain related territories, for example the Faroe Islands of Denmark, the related EU member state may choose:

1. •

   not to apply any VAT

2. •

   to apply different VAT rates under different conditions than in the rest of its territory

3. •

   to apply the same VAT rates