Did I miss something here? Why are you talking about the Vatican?
Well some places in Europe are getting charged VAT even though they don't pay VAT and Vatican City is included in that list of places (it's in the FAQ section).
"We’ve been alerted to a few anomalies, that we’ll look at: these include odd areas of Euro-land that are VAT-free, such as the Canary Islands (Spanish territory, but, apparently, no VAT) and presumably Andorra, San Marino and the Vatican City. "
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