Countries With No VAT (2026)

Which countries have no VAT?

VAT — or its identical twin, GST — is now used in more than 170 countries, which makes the exceptions unusual enough to be worth listing. Roughly two dozen jurisdictions levy no Value Added Tax at all in 2026. They fall into four recognisable groups: the United States, which chose retail sales tax instead; the low-tax financial and trading centres; the oil and gas states that have never needed a broad consumption tax; and a small number of countries where administrative capacity, not policy, is the constraint.

"No VAT" is not the same as "no tax on what you buy". Every jurisdiction below raises consumption revenue some other way — sales tax, customs duty, excise, hotel and service levies — so the headline is about the mechanism, not automatically about the price on the shelf.

The full list, region by region

Americas

• United States — the only large developed economy with no VAT. Around 45 states and thousands of local jurisdictions levy retail sales tax instead, at combined rates that commonly run between 4% and 10%. Because it is charged only at the final sale, businesses do not recover it the way they recover VAT.
• Bermuda — no VAT or sales tax; revenue comes largely from customs duty and payroll tax.
• Cayman Islands — no VAT, no sales tax and no income tax; import duty does the work.
• British Virgin Islands — no VAT; import duty and payroll tax instead.
• Turks and Caicos Islands — no VAT; a proposal to introduce one was abandoned before it took effect.

Europe

No EU member state is VAT-free — running a VAT is a condition of membership under Directive 2006/112/EC. The exceptions are outside the Union:

• Gibraltar — a British Overseas Territory outside the EU VAT area, with no VAT and no general sales tax. Import duty applies instead.
• Vatican City — no VAT system of its own.
• Andorra — not VAT-free, but its IGI (Impost General Indirecte) at 4.5% is the lowest general consumption tax rate in Europe, well under a quarter of the EU average of 21.9%.

Several territories of EU member states are formally excluded from the EU VAT area and levy their own local taxes: the Canary Islands (IGIC, standard rate 7%), Ceuta and Melilla (IPSI), and the Åland Islands. Supplies between these territories and the EU mainland are treated as imports and exports rather than intra-community transactions.

Middle East

The 2016 GCC framework agreement committed all six Gulf states to introducing VAT. Four have done so — the UAE and Saudi Arabia in 2018, Bahrain in 2019 and Oman in 2021. Two have not:

• Kuwait — VAT is legislated for under the GCC agreement but has not been implemented; an excise tax on selected goods was introduced instead.
• Qatar — the same position: committed in principle, not yet in force.
• Iraq — no general VAT; sales taxes apply to specific services such as hotels and telecoms.

Asia-Pacific

• Hong Kong SAR — no VAT, no GST and no general sales tax. A 2006 proposal for a 5% GST was withdrawn after public consultation.
• Macau SAR — no VAT; gaming and tourism revenue substitutes for a broad consumption tax.
• Brunei — no VAT or GST; oil and gas revenue funds the state.
• North Korea — no VAT in any conventional sense.
• Marshall Islands and Palau — no VAT; gross revenue and import taxes instead.

Africa

• Libya — no VAT; customs duty and a stamp duty regime apply.
• Somalia — no functioning national VAT, though sales taxes are levied regionally.
• Eritrea — sales tax rather than VAT.

Most of the continent has gone the other way: South Africa charges 15%, Egypt 14% and Nigeria 7.5%.

The lowest VAT rates in the world

If a jurisdiction with no VAT is not what you need, the next question is usually which country charges the least. These are the lowest standard rates among the 60 countries tracked on this site:

The lowest positive VAT percentage anywhere in the European Union is Luxembourg's 3% super-reduced rate, which applies to a narrow list including food, books, children's clothing and pharmaceuticals. Its standard rate, 17%, is also the EU's lowest. At the other end, Hungary's 27% is the highest standard rate in the world. Compare every figure in the VAT rates by country table.

What this means in practice

If you are selling into a country with no VAT

There is no VAT registration to worry about and no local VAT to charge — but there may well be sales tax, import duty or a digital services tax. US sales tax in particular has its own nexus rules, which can create a filing obligation for a remote seller with no physical presence in the state.

If you are buying from one

An invoice from a supplier in Hong Kong or the US carries no VAT, but that does not make the purchase VAT-free at your end. If you are a registered business in a VAT country buying services, you normally self-account under the reverse charge mechanism at your own country's rate. Goods arriving from outside your VAT area are taxed at import instead.

If you are travelling

A VAT-free destination means no VAT refund to claim on the way out, because none was charged on the way in. Refund schemes only exist where VAT does — see VAT refunds for tourists and businesses.

Frequently asked questions

Which countries have no VAT?

Around two dozen jurisdictions. The largest by economy is the United States, which uses state and local sales taxes instead. The rest are mostly small financial centres, Gulf states and territories: Hong Kong, Macau, Brunei, Kuwait, Qatar, Bermuda, the Cayman Islands, the British Virgin Islands, Gibraltar, Iraq, Libya, Somalia and Eritrea among them.

Is there a country in Europe with no VAT?

Not inside the EU — a functioning VAT is a condition of membership. Outside it, Gibraltar and Vatican City levy none, and Andorra's IGI at 4.5% is the lowest consumption tax rate on the continent.

Which country has the lowest VAT rate?

Of the countries listed on this site, the United Arab Emirates and Canada share the lowest standard rate at 5%. Luxembourg's 3% super-reduced rate is the lowest positive VAT percentage in the European Union.

Does "no VAT" mean cheaper prices?

Not reliably. Jurisdictions without VAT raise the revenue elsewhere — retail sales tax, customs duty, excise, or targeted service taxes. Hong Kong genuinely is a low-consumption-tax jurisdiction; the United States collects sales tax at rates that in some cities approach 10%.

Related reading

• VAT rates by country — standard and reduced rates for 60 countries in one sortable table.
• United States sales tax — how the main VAT-free system actually works.
• VAT rates in Europe — all 27 EU member states plus non-EU Europe.
• VAT vs GST vs sales tax — what actually separates the three systems.