Top 10 jurisdictions with the lowest effective VAT/sales tax rates
A low headline VAT or sales-tax rate can still bite if surtaxes stack up, if your sector is in-scope while competitors aren’t, or if non-resident rules force you to register immediately. This ranking highlights ten jurisdictions where the real-world load is exceptionally light—from true 0% regimes to low-rate systems with generous carve-outs and high registration thresholds.
Fast takeaways
- True zero regimes: Hong Kong, Macau, Guernsey (for now), Qatar, Kuwait — no broad VAT/GST or retail sales tax.
- Europe’s lowest broad VAT-type rate: Andorra’s IGI at 4.5%.
- Low rate + high threshold: Jersey’s GST is 5% with a £300,000 registration threshold, keeping many SMEs out.
- GCC 5% models: UAE and Oman pair modest rates with extensive zero-rating for exports and public-interest carve-outs.
- U.S. exception: Delaware has no state or local sales tax; watch economic nexus if you sell interstate.
Ranked: lowest effective VAT / sales-tax jurisdictions
Effective rate reflects practical checkout burden for typical in-scope domestic transactions in 2025 (cross-border destination tax can still apply elsewhere).
#1 Hong Kong SAR 0% broad VAT/GST
No general consumption tax; excises apply to select goods.
Hong Kong operates without a broad VAT/GST or retail sales tax. For most goods and services, the domestic consumption-tax burden is genuinely zero, reducing compliance overhead and VAT cash-flow friction.
#2 Macau SAR 0% broad VAT/GST
Tourism-oriented economy; narrow duties/fees may apply in specific cases.
Like Hong Kong, Macau does not levy a general VAT/GST. The absence of a broad consumption tax supports pricing flexibility in hospitality, luxury retail, and events.
#3 Guernsey (Channel Islands) 0% VAT/GST (policy watch)
No VAT/GST as of 2025; reform discussions continue.
Guernsey currently runs without VAT or GST, yielding true 0% effective rates for most local sales. Scenario-plan a future low-rate GST and track budget consultations for timing.
#4 Qatar 0% VAT (not applied yet)
GCC framework signatory; rollout expected medium-term.
Qatar has not applied VAT in practice, so the present-day domestic effective rate is 0%. Prepare systems, pricing clauses, and invoicing logic for a GCC-style model if implementation proceeds.
#5 Kuwait 0% VAT (not implemented yet)
Consumption VAT remains pending; monitor official updates.
Kuwait has not rolled out VAT for domestic sales, keeping the practical consumption-tax burden nil in 2025. Conservative planning may still pencil a future VAT scenario to avoid pricing shock.
#6 Delaware (United States) 0% state & local sales tax
No retail sales tax; sellers face gross-receipts tax and interstate nexus rules.
Consumers pay 0% at checkout in-state. Remote sellers shipping into other states may still need to collect destination sales tax once nexus thresholds are met.
#7 Andorra IGI 4.5% (Europe’s lowest broad rate)
VAT-type system with a uniquely low standard rate; export zero-rating applies.
Andorra’s IGI is a full VAT-type system with a 4.5% standard rate. For visitor retail and many domestic transactions, the tax wedge is notably slim.
#8 Jersey (Channel Islands) GST 5% + £300k threshold
High registration threshold keeps many SMEs out of scope.
A 5% GST is already mild, and the unusually high threshold means many SMEs never register—creating a practical ~0% environment for those traders while larger firms still file and remit.
#9 United Arab Emirates VAT 5%
Exports commonly zero-rated; input VAT recovery can lower net burden for exporters.
The UAE’s standard rate is low, and sector rules can materially reduce effective burden. Non-resident suppliers should check registration rules that may apply without a threshold.
#10 Oman VAT 5%
Exports 0%; public-interest carve-outs; threshold excludes many micro-enterprises.
Oman mirrors GCC peers with a modest 5% VAT and broad zero-rating for exports. Documentation and customs valuation discipline matter most for import-heavy supply chains.
Top 10 summary table
Effective burden reflects typical in-scope domestic transactions. Cross-border destination rules may still apply.
| Rank | Jurisdiction | Effective rate | System | Key driver |
|---|---|---|---|---|
| #1 | Hong Kong SAR | 0% | No broad VAT/GST | No general consumption tax |
| #2 | Macau SAR | 0% | No broad VAT/GST | Tourism-oriented VAT-free domestic pricing |
| #3 | Guernsey | 0% | No VAT/GST (policy watch) | No broad consumption tax in force |
| #4 | Qatar | 0% | VAT not applied (yet) | Domestic VAT not applied; rollout expected |
| #5 | Kuwait | 0% | VAT not implemented (yet) | Domestic consumption VAT pending |
| #6 | Delaware (USA) | 0% | No sales tax | No state or local retail sales tax |
| #7 | Andorra | 4.5% | IGI (VAT-type) | Europe’s lowest broad VAT-type standard rate |
| #8 | Jersey | 5% | GST | High registration threshold (£300,000) |
| #9 | United Arab Emirates | 5% | VAT | Export zero-rating + input VAT recovery |
| #10 | Oman | 5% | VAT | Exports 0% + threshold excludes micro firms |
Chart: effective consumption-tax burden (Top 10)
Bars show effective checkout burden for typical in-scope domestic transactions in 2025. Zero regimes appear as 0%.
Fallback list (if the chart can’t load)
- Hong Kong SAR — 0%
- Macau SAR — 0%
- Guernsey — 0%
- Qatar — 0%
- Kuwait — 0%
- Delaware (USA) — 0%
- Andorra — 4.5%
- Jersey — 5%
- United Arab Emirates — 5%
- Oman — 5%
Methodology: what “effective” VAT / sales-tax burden means
This ranking prioritizes the practical consumption-tax load, not just the statutory headline rate. The aim is to approximate what firms and consumers actually experience in pricing, compliance, and cash flow.
- Existence of a broad consumption tax: true 0% regimes (no VAT/GST/sales tax) versus low-rate systems.
- Registration thresholds: high thresholds can keep many SMEs out of scope, lowering their effective burden toward ~0%.
- Zero-rating & exemptions: export zero-rating and public-interest carve-outs can materially reduce effective burden—especially for B2B exporters with input-tax recovery.
- Local add-ons (or none): state/local stacking can overwhelm a “low” headline; Delaware is clean at both state and local layers.
- Non-resident rules: thresholds that help locals may not apply to non-resident suppliers (especially digital B2C).
Insights: why the lowest-burden systems cluster where they do
- Small, trade-oriented hubs often avoid broad consumption taxes to stay frictionless for services, trading, and tourism.
- Low-rate VAT models lean on base design and compliance rather than high rates; exports are protected via zero-rating.
- Threshold design can reduce SME compliance load while preserving collections from larger firms.
- “Zero” isn’t “no tax at all”: duties, excises, fees, and business-side taxes can still matter for total cost.
What this means for you: pricing, margins, and cross-border reality
- Consumers: a 0–5% regime can widen price sensitivity, especially in tourism and discretionary retail.
- Local sellers: fewer VAT obligations can reduce admin load, but import duties or fees may matter more.
- Exporters: zero-rating + input recovery often pushes net VAT toward zero; refund timing becomes the key variable.
- E-commerce: destination rules dominate; selling from a 0% base doesn’t eliminate collection duties elsewhere.
FAQ
Why can Hong Kong be “0%” and still collect taxes?
Is VAT always worse than sales tax?
Why do thresholds matter so much?
If a place is 0%, can I ignore tax when selling online?
Why are UAE and Oman “only” 5% but sometimes feel even lower?
Could these rankings change quickly?
Explore the ranking (interactive table)
Use search, sorting, and filters to model “effective” burden under different assumptions. Toggle between Effective rate and Headline standard rate to see how a low-rate regime can still differ in practical impact.
| Rank | Jurisdiction | Rate | System | Registration threshold | Practical notes |
|---|---|---|---|---|---|
| #1 | Hong Kong SAR | 0%0% | No broad VAT/GST | N/A | Excises apply to select goods; destination VAT/sales tax may still apply cross-border |
| #2 | Macau SAR | 0%0% | No broad VAT/GST | N/A | Narrow duties/fees can exist; broad VAT/GST absent |
| #3 | Guernsey | 0%0% | No VAT/GST (policy watch) | N/A | Scenario-plan a future low-rate GST if revenue reforms advance |
| #4 | Qatar | 0%0% | VAT not applied (yet) | N/A | Prepare contracts and invoicing for potential GCC-style VAT rollout |
| #5 | Kuwait | 0%0% | VAT not implemented (yet) | N/A | Conservative models may pencil a future VAT scenario; monitor official updates |
| #6 | Delaware (USA) | 0%0% | No sales tax | N/A | Gross-receipts tax is seller-side; interstate sales may still trigger destination tax collection |
| #7 | Andorra | 4.5%4.5% | IGI (VAT-type) | Rules vary by activity | Very low broad standard rate; export zero-rating and reduced rates can lower effective burden |
| #8 | Jersey | 5%5% | GST | £300,000 (taxable supplies) | High threshold keeps many SMEs out; imported/online rules can narrow arbitrage |
| #9 | United Arab Emirates | 5%5% | VAT | AED 375,000 (mandatory) | Exports and many B2B flows can see low net burden via zero-rating and input recovery |
| #10 | Oman | 5%5% | VAT | OMR 38,500 (mandatory) | Export zero-rating; collect 5% on taxable supplies once registered; documentation is key |
“Threshold” is shown in local currency and reflects mandatory VAT/GST registration where applicable. For 0% regimes and sales-tax-free jurisdictions, VAT/GST thresholds are not applicable.
Scatter: tax load vs compliance intensity (heuristic)
X-axis is effective rate (%). Y-axis is a simple compliance-intensity score (1–4) based on whether a broad VAT/GST exists and whether routine registration/returns are typical.
Fallback (if the chart can’t load)
- 0% regimes (Hong Kong, Macau, Guernsey, Qatar, Kuwait): low routine VAT compliance (score ~1)
- Delaware (0% sales tax): low checkout tax, but seller-side taxes can still exist (score ~2)
- Andorra / Jersey / UAE / Oman: VAT-type compliance typically higher than 0% regimes (score ~3–4)
Interpretation: what the ranking is really telling you
The “lowest effective rate” map is less about a single number and more about scope, registration triggers, and cash-flow mechanics. Two jurisdictions can share the same headline rate yet feel very different in practice.
- True 0% regimes remove routine VAT friction entirely—no output tax, no input recovery cycle, no periodic VAT returns.
- Low-rate VAT regimes can be “near-zero” for exporters and B2B supply chains when input tax is recoverable and exports are zero-rated.
- Threshold-driven systems can be effectively 0% for many SMEs, but non-resident rules may still force immediate registration.
- Local add-ons are where “low headline” often breaks—Delaware stands out because it’s clean at both state and local layers.
Policy takeaways (why some systems stay “light”)
- Broaden the base, keep the rate low if the goal is stable revenue with minimal distortion.
- Use thresholds deliberately to reduce SME compliance burden while keeping large-firm collections intact.
- Protect exports through zero-rating and predictable refund mechanisms to reduce embedded tax.
- Minimize stacking layers (multiple local surtaxes, complex place-of-supply tests) if administrative simplicity is a strategic advantage.
- Clarity beats complexity: predictable guidance and stable rules often matter more than a slightly lower headline rate.
Primary sources (official)
Official pages used to verify the existence (or absence) of a broad consumption tax, plus rate/threshold basics where applicable.
-
Hong Kong SAR — no sales tax or VAT
Confirms absence of a broad consumption tax.
-
Macau SAR — official taxation overview
Lists the principal taxes in the system (no broad VAT/GST listed).
-
Jersey — GST overview
GST basics and business guidance.
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Jersey — GST registration threshold
Confirms the £300,000 registration threshold.
-
United Arab Emirates — VAT overview & threshold
Standard VAT rate (5%) and mandatory registration threshold (AED 375,000).
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United Arab Emirates — VAT registration (FTA)
Registration conditions (including non-resident considerations).
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Oman — Tax Authority: VAT registration
Registration thresholds and VAT framework basics.
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Qatar — General Tax Authority: investor guide
VAT policy status context.
-
Delaware (USA) — Division of Revenue
Official portal for Delaware tax guidance.
-
Andorra — IGI law (Portal Jurídic)
Legal text for IGI (VAT-type) framework and rates.
Note: Kuwait and Guernsey policy status should be monitored via official budget/tax-reform communications; timelines can change.
