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What a company in the European Union has to get right in SAP S/4HANA: one VAT system with 27 sets of rates, IFRS for listed groups, euro and non-euro currencies, and e-invoicing arriving country by country.

  • 27 member states
  • VAT Directive
  • IFRS
  • E-invoicing · ViDA

By · Updated

At a glance

Member states
27
Official languages
24
Euro area
21 countries
Schengen area
25 EU + 4 non-EU
Standard VAT
17% to 27%
Listed groups report in
IFRS
Intra-EU e-invoicing
July 2030

Overview

The European Union is a political and economic union of 27 countries. It began as a common market and a customs union; today its single market lets goods, services, capital and people move freely between the member states.

  • Capital

    The EU has no official capital. Brussels hosts most of its institutions; the others sit in Strasbourg, Luxembourg and Frankfurt.

  • Flag

    A circle of 12 golden stars on a blue background. The number of stars is fixed and does not follow the number of members.

  • Languages

    24 official languages. The European Commission works mostly in English, French and German.

  • Financial reporting

    Listed groups prepare their consolidated accounts under IFRS as adopted by the EU (IAS Regulation, 2002). Individual company accounts follow each country’s local GAAP, unless the country allows IFRS.

27 countries, euro and non-euro

Dotted map of Europe: the 21 euro area countries in blue, the six EU members outside the euro (Sweden, Denmark, Poland, Czechia, Hungary and Romania) in gold, and the countries outside the EU in grey
  • Euro area · 21
    Bulgaria joined on 1 January 2026
  • EU, not euro · 6
    Czechia, Denmark, Hungary, Poland, Romania, Sweden
  • Outside the EU
    Shown for context
Malta, Luxembourg and Cyprus are only a few dots at this scale.

Where the EU sits

The main institutions are spread over four cities, all within about 400 km of each other.

  • Brussels

    Belgium

    • European Commission
    • European Council and Council of the EU
    • European Parliament: committees and some plenary sessions

    Most of the day-to-day work of the EU happens here.

  • Strasbourg

    France

    • European Parliament: official seat
    • Monthly plenary sessions

    The Parliament votes here about twelve times a year.

  • Luxembourg

    Luxembourg

    • Court of Justice of the EU
    • European Court of Auditors
    • European Investment Bank
    • Parliament’s General Secretariat

    The Council of the EU meets here in April, June and October.

  • Frankfurt

    Germany

    • European Central Bank

    Sets monetary policy for the euro area and supervises its largest banks.

VAT in the EU

Value added tax (VAT) is a tax on consumption charged at every step of the supply chain. Each business charges VAT on its sales and deducts the VAT it paid on its purchases, so only the final consumer bears it.

The EU sets the common rules in the VAT Directive (2006/112/EC). The EU does not collect VAT itself: each member state collects its own and chooses its rates within the Directive’s limits.

What the Directive allows

  • ≥15%

    Standard rate

    At least 15%. The Directive sets no maximum.

  • ≥5%

    Up to two reduced rates

    For goods and services on the Directive’s list, such as food, water and passenger transport.

  • <5%

    One lower rate and 0%

    Since 2022, for a short list of essentials such as food, medicines and books. Older exceptions still apply.

Did you know? France was the first country to introduce VAT, in 1954. The First and Second VAT Directives of 1967 made it the common turnover tax of the European Economic Community, but they set no common rate.

Selling to another EU country

Example: a German company sells goods to a company in France. The goods are taxed where they arrive, and the buyer pays the VAT.

  1. Supplier in Germany

    Invoices without VAT, with its own and the customer’s VAT numbers: an intra-Community supply.

    • VIES check
  2. Goods cross the border

    The goods are transported from Germany to France. Proof of transport supports the 0% rate.

    • Transport proof
  3. Customer in France

    Self-assesses French VAT at 20% and deducts it in the same return: an intra-Community acquisition.

    • Reverse charge
  4. Both report

    The supplier lists the sale in the EC Sales List. Above national thresholds, both file Intrastat statistics.

    • EC Sales List
    • Intrastat

Services between businesses

As a rule, VAT is due where the customer is established, and the customer accounts for it under the reverse charge. The supplier lists the sale in the EC Sales List.

Sales to consumers

Above €10,000 a year of cross-border sales to consumers, VAT is due in each customer’s country. The One-Stop Shop (OSS) lets the seller declare it all in one quarterly return at home.

VAT rates by country

Standard rates run from 17% in Luxembourg to 27% in Hungary. They change often: Estonia, Finland, Romania and Slovakia all raised theirs in 2024 or 2025.

Rates as of October 2026
Standard VAT rate, % · the dashed line marks the EU minimum of 15%
27HU25.5FI25DK25HR25SE24EE24GR23IE23PL23PT23SK22IT22SI21BE21CZ21ES21LT21LV21NL21RO20AT20BG20FR19CY19DE18MT17LU15% minimum
  • Euro area
  • EU, not euro
All rates
CountryStandardReducedBelow 5%Recent change
ATAustria20%10%, 13%4.9%4.9% on basic foods from 1 Jul 2026
BEBelgium21%6%, 12%—Hotels and campsites 6% → 12% (1 Mar 2026)
BGBulgaria20%9%——
HRCroatia25%5%, 13%——
CYCyprus19%5%, 9%3%—
CZCzechia21%12%—15% and 10% merged into 12% (Jan 2024)
DKDenmark25%———
EEEstonia24%9%, 13%—Standard 22% → 24% (1 Jul 2025)
FIFinland25.5%10%, 13.5%—Standard 24% → 25.5% (Sep 2024); 14% → 13.5% (Jan 2026)
FRFrance20%5.5%, 10%2.1%—
DEGermany19%7%—Restaurant meals 19% → 7% (Jan 2026)
GRGreece24%6%, 13%——
HUHungary27%5%, 18%——
IEIreland23%9%, 13.5%4.8%Restaurant meals 13.5% → 9% (1 Jul 2026)
ITItaly22%5%, 10%4%—
LVLatvia21%5%, 12%——
LTLithuania21%5%, 12%—9% rate replaced by 12% and 5% (Jan 2026)
LULuxembourg17%8%, 14%3%Back to 17% after the 2023 cut to 16%
MTMalta18%5%, 7%, 12%——
NLNetherlands21%9%—Accommodation 9% → 21% (Jan 2026)
PLPoland23%5%, 8%——
PTPortugal23%6%, 13%——
RORomania21%11%—Standard 19% → 21%; 9% and 5% → 11% (1 Aug 2025)
SKSlovakia23%5%, 19%—Standard 20% → 23%; new 19% and 5% (Jan 2025)
SISlovenia22%5%, 9.5%——
ESSpain21%10%4%—
SESweden25%6%, 12%—Food 12% → 6% until end-2027 (1 Apr 2026)

Mainland rates. Some regions have their own: Madeira and the Azores, some Greek islands, Corsica, and the Canary Islands, which use IGIC instead of VAT.

Check the national tax authority before you set up tax codes. Which goods and services take each reduced rate differs by country.

E-invoicing and digital reporting

In March 2025 the EU adopted VAT in the Digital Age (ViDA). Member states may now require e-invoices for domestic sales without asking the EU first, and from July 2030 invoices between businesses in different EU countries must be structured e-invoices (EN 16931), reported to the tax authorities almost in real time.

Until then, each country moves at its own pace, with its own platform and format.

B2B e-invoicing, country by country

  1. Jan 2019Live

    Italy

    B2B e-invoices for all, through the national exchange system.

    • SdI
  2. Jan 2025Live

    Germany: receive

    Every business must be able to receive structured e-invoices.

    • XRechnung
    • ZUGFeRD
  3. Jan 2026Live

    Belgium and Croatia

    Belgium: B2B e-invoices over Peppol. Croatia: B2B e-invoices with real-time reporting.

    • Peppol
  4. Feb 2026Live

    Poland

    The national e-invoicing platform, mandatory in stages through 2027.

    • KSeF
  5. Sep 2026Live

    France: phase 1

    All businesses receive; large and mid-sized ones issue, through approved platforms.

    • PA
  6. Jan 2027Next

    Germany and Slovakia

    Germany: issuers with turnover over €800,000. Slovakia: domestic B2B e-invoices.

    • Peppol
  7. Sep 2027Planned

    France: phase 2

    Small and micro companies start issuing e-invoices too.

    • PA
  8. Jul 2030Planned

    ViDA: intra-EU

    Structured e-invoices and digital reporting for B2B sales between EU countries.

    • EN 16931

Greece, Spain, Latvia, Slovenia and Ireland have announced dates too. Check the latest before planning a rollout: dates often move.

What it means in SAP

The EU rules are shared, but each company code follows its own country version. Five areas need attention in every EU rollout.

  1. Tax codes per rate

    Each country’s tax procedure needs a tax code for every rate. When a rate changes, a new code usually takes it, and tax determination in sales and purchasing moves to it on the effective date.

    • FTXP
    • VK11

  2. VAT numbers in other EU countries

    A company code registered for VAT in several EU countries must report each one separately: plants abroad, or multiple VAT registrations in SAP S/4HANA.

    • Plants abroad

  3. EC Sales List, VAT and OSS returns

    Generated country by country in the Run Statutory Reports app of SAP Document and Reporting Compliance (DRC).

    • DRC

  4. E-invoicing

    DRC eDocuments create, send and receive the e-invoices each country requires, such as Peppol, KSeF in Poland and SdI in Italy.

    • eDocuments
    • Peppol

  5. IFRS and local GAAP

    Group IFRS in the leading ledger and local GAAP, such as German HGB or the French PCG, in a parallel ledger.

    • 0L
    • Parallel ledger

Setting up a company in the EU

A limited company is a legal entity separate from its owners, whose liability is limited to what they put in. Each EU country has its own company law, so the legal form, share capital and timelines differ from one to the next.

  • One single market of 27 countries
  • Stable institutions
  • Access to finance
  • Skilled workforce

Before you incorporate

  • Legal form and share capital. Usually a limited liability company. Minimum capital goes from €1 in some countries to €25,000 for a German GmbH.

  • Registered address in the country, often through a virtual office.

  • VAT registration and an EU VAT number that customers can check in VIES.

  • Business bank account. Some banks ask for a visit in person.

  • Local accountant for bookkeeping, payroll and tax returns.

  • Corporate tax and dividends. Rates and small-company regimes differ a lot.

Take advice from a local lawyer or accountant before choosing the country and the legal form.

Four Central European countries compared
CzechiaHungaryPolandSlovakia
CapitalPragueBudapestWarsawBratislava
LanguageCzechHungarianPolishSlovak
CurrencyCZKHUFPLNEUR
Population10.9 million9.5 million36.5 million5.4 million
Area79,000 km²93,000 km²313,000 km²49,000 km²
EU · Schengen2004 · 20072004 · 20072004 · 20072004 · 2007
Corporate tax21%9%19% ¹21% ²
Dividend tax ³15%15%19%7%
VAT, standard21%27%23%23%
Limited companys.r.o.Kft.sp. z o.o.s.r.o.
Minimum capitalCZK 1HUF 3 millionPLN 5,000€5,000

¹ Poland: 9% for small taxpayers with revenue up to €2 million.

² Slovakia: 10% for revenue up to €100,000 and 24% above €5 million.

³ For individuals resident in the country. Hungary adds a 13% social contribution, up to a cap.

Figures as of October 2026. Tax law in these countries changes often.

The 27 member states

21 use the euro and 25 are in the Schengen area. Bulgaria and Romania joined Schengen fully on 1 January 2025, and Bulgaria adopted the euro on 1 January 2026.

  • 27Member statesCroatia was the last to join, in 2013
  • 21Use the euroBulgaria since 1 January 2026
  • 6Keep their own currencyCZK, DKK, HUF, PLN, RON, SEK
  • 25In SchengenAll but Ireland and Cyprus
CountryISOCalling codeCapitalOfficial languagesEU sinceCurrencySchengen
AustriaAT · AUT+43ViennaGerman1995€ since 1999Since 1997
BelgiumBE · BEL+32BrusselsDutch, French, German1958 (founder)€ since 1999Since 1995
BulgariaBG · BGR+359SofiaBulgarian2007€ since 2026Since 2025
CroatiaHR · HRV+385ZagrebCroatian2013€ since 2023Since 2023
CyprusCY · CYP+357NicosiaGreek, Turkish2004€ since 2008Not yet
CzechiaCZ · CZE+420PragueCzech2004CZKSince 2007
DenmarkDK · DNK+45CopenhagenDanish1973DKKSince 2001
EstoniaEE · EST+372TallinnEstonian2004€ since 2011Since 2007
FinlandFI · FIN+358HelsinkiFinnish, Swedish1995€ since 1999Since 2001
FranceFR · FRA+33ParisFrench1958 (founder)€ since 1999Since 1995
GermanyDE · DEU+49BerlinGerman1958 (founder)€ since 1999Since 1995
GreeceGR · GRC+30AthensGreek1981€ since 2001Since 2000
HungaryHU · HUN+36BudapestHungarian2004HUFSince 2007
IrelandIE · IRL+353DublinIrish, English1973€ since 1999Opt-out
ItalyIT · ITA+39RomeItalian1958 (founder)€ since 1999Since 1997
LatviaLV · LVA+371RigaLatvian2004€ since 2014Since 2007
LithuaniaLT · LTU+370VilniusLithuanian2004€ since 2015Since 2007
LuxembourgLU · LUX+352LuxembourgLuxembourgish, French, German1958 (founder)€ since 1999Since 1995
MaltaMT · MLT+356VallettaMaltese, English2004€ since 2008Since 2007
NetherlandsNL · NLD+31AmsterdamDutch1958 (founder)€ since 1999Since 1995
PolandPL · POL+48WarsawPolish2004PLNSince 2007
PortugalPT · PRT+351LisbonPortuguese1986€ since 1999Since 1995
RomaniaRO · ROU+40BucharestRomanian2007RONSince 2025
SlovakiaSK · SVK+421BratislavaSlovak2004€ since 2009Since 2007
SloveniaSI · SVN+386LjubljanaSlovene2004€ since 2007Since 2007
SpainES · ESP+34MadridSpanish1986€ since 1999Since 1995
SwedenSE · SWE+46StockholmSwedish1995SEKSince 2001

Outside the euro: Denmark has an opt-out. Czechia, Hungary, Poland, Romania and Sweden must adopt the euro one day but have set no date.

Outside Schengen: Ireland has an opt-out, and Cyprus is still working to join.

References