26 VAT changes coming in January 2026

1. E-Invoicing Mandates

Source Innovate Tax

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Executive Summary:

This document summarizes 26 significant Value Added Tax (VAT) updates scheduled to take effect globally in January 2026. These changes span e-invoicing mandates, VAT rate adjustments, new tax laws, the adoption of new currencies, and sector-specific measures designed to stimulate economic or social progress. Businesses operating internationally need to be aware of these changes to ensure compliance and avoid penalties. The trends show a move towards digitalization and simplification of VAT systems, as well as targeted VAT measures to address specific economic and social goals.

Key Themes and Changes:

E-Invoicing Mandates & Digitalization: A significant trend is the continued push toward mandatory e-invoicing.

• Belgium: “Launch of mandatory B2B Peppol-based e-invoicing…applies to all transactions between Belgian VAT-registered businesses.”
• Croatia: “Mandatory e-invoicing B2G and B2B – between resident businesses; e-reporting submissions of invoices not subject to e-invoicing mandate.”
• Morocco: “Early 2026 phased launch of e-invoicing with large taxpayers.”
• Malaysia: “The fourth wave of e-invoicing is still going ahead. Taxpayers above RM1 million will be joining the mandate.”
• Angola: “Obligation to issue e-invoices for most supplies of goods and services for large taxpayers with annual sales above AOA 25 million…with a 3-month soft landing phase until 31 Dec 2025”

VAT Rate Adjustments: Several countries are modifying their VAT rates, both standard and reduced, reflecting diverse economic and social priorities.

• Netherlands: “January marks the end to 9% accommodation services reduced rate, switching back to the standard rate of 21%.”
• Finland: “A 0.5% cut to reduced rate was confirmed back in September. From January, it will stand at 13.5% on food, accommodation, passenger transport and many other services.”
• Zimbabwe: “A 0.5% rise to VAT is effective 1st January 2026. Standard VAT rate to increase from 15% to 15.5%.”
• Liberia: “A 1% rise to the Goods and Services Tax from 12% to 13%.”
• Germany: “The German Ministry of Finance has issued draft tax amendments for permanent 7% reduced VAT rate for food sales by hospitality businesses.”

New VAT Laws and System Overhauls: Some countries are introducing entirely new VAT frameworks or significantly revising existing ones.

• Italy: “As it stands, from 1st January 2026, a new consolidated code on value added tax is set to take effect. This long anticipated “Testo Unico IVA” (new VAT code) will streamline decades of fragmented VAT legislation into a single, coherent framework.”
• China: “The first consolidated VAT law will come into effect on 1st January 2026. VAT rates and other key elements remain consistent with the existing system.”
• Bhutan: “The much-postponed introduction of Goods and Services Tax to Bhutan is set to start in January 2026. The new GST rate is expected to be 5% on domestic supplies and imports.”
• Brazil: Phased introduction of CBS and IBS taxes (dual VAT regime) over a seven-year transition period.

Targeted VAT Measures: Several countries are implementing VAT changes to support specific sectors or address social concerns.

• Portugal: Targeted VAT measures to prioritize sectors viewed as economically or socially significant. A 6% reduced rate applying to olive oil production, as well as a VAT exemption for fertilisers, seeds and soil enhancers throughout 2026.
• Slovakia: “Under the plan, the standard 23% rate will apply to foods with high sugar or salt content,” to encourage healthier choices.
• Austria: “Austria has joined a growing list of countries to introduce a 0% VAT rate on feminine hygiene products and contraceptives, eliminating the so-called “tampon tax”.”

EU VAT Simplification and Changes: The EU continues to adjust VAT rules to streamline processes and address loopholes.

• France: “From 1st January 2026, France will abolish Regime 42, officially known as CPC 42 00, for non-EU importers…Now, only an EU buyer or their appointed representative can act as the importer under Regime 42.”
• Slovenia: “Slovenia to introduce VAT groups, including the option for related taxpayers to join under a single VAT number for reporting and exempt intra-group invoicing.”

Other Notable Changes:

• Bulgaria: Adoption of the Euro currency.
• UAE: “Removal of self-invoice requirement for reverse charge…Statutory limitation period for refund claims…Denial of input tax deduction where linked to evasion.”
• Illinois, USA: “From 1st January 2026, only if non-resident sellers exceed $100,000 sales to Illinois customers will they have to begin charging state sales tax.” (Withdrawal of one of the two thresholds for out-of-state sellers)
• Maine, USA: “An extension of 5.5% state tax to streaming platforms and broadens digital services already subject to tax.”
• Azerbaijan: “Non-resident providers of digital services to Azerbaijani consumers will be mandated to register with the tax administration and levy 18% VAT.”
• Saudi Arabia: “Marketplaces take on non-resident digital services VAT obligations as of January 2026.”

Implications for Businesses:

• Compliance: Businesses must review their VAT processes and systems to ensure they comply with the new regulations in each jurisdiction where they operate.
• System Updates: Companies may need to update their accounting and ERP systems to handle e-invoicing requirements and new VAT rates.
• Financial Planning: Businesses should factor in the potential impact of VAT rate changes on their pricing and profitability.
• Training: Employees responsible for VAT compliance need to be trained on the new rules and procedures.
• Opportunity: The simplification measures introduced by countries like Italy and Poland offer an opportunity to streamline VAT processes.

Recommendations:

• Conduct a thorough assessment of the impact of these changes on your business.
• Consult with tax advisors to ensure compliance.
• Implement the necessary system updates and process changes.
• Communicate the changes to relevant stakeholders within your organization.

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