VAT registration in Europe. What are the benefits?

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What is VAT number and how to get it?

Very often owners of the registered companies in Europe face such issues as demands of their European partners on providing them with VAT registry number (VAT – Value-Added Tax). As a result, this poses the question – what is “European VAT”. Value Added Tax (VAT) is the input value-added tax applicable in EU member countries.

How to attain it?

Depending on the country of European Union the sequence of activities may slightly differ from the main procedures. However, for attaining VAT number it`s necessary to make a petition to tax authorities. Do not forget to indicate:

  • name of a company
  • address and contact info of the company office
  • name and address of authorized employee
  • description (type) of business
  • goods (service) type
  • type of goods (services), that will be purchased and for which the VAT number registration will be used
  • countries where the goods (services) will be purchased by the company
  • countries where goods (services) will be delivered
  • approximate amount of accounts, falling within VAT

After VAT registry the company has to file VAT financials to fiscal authority on a regular basis (in some countries once a month, in others once a quarter).

Important: there are two kinds of VAT number: compulsory and voluntary. Depending on the company`s business and its movement the conclusion if the company can register VAT number is made. The company in Cyprus has to register as a VAT payer, if in the end of any month the value of taxable supply, stated during last 12 months, is above 15 600 euro. In France, for instance, the company is obliged to obtain VAT number in the process of practical carrying on business if its distribution per tax year does not exceed 70 000 euro. VAT payments should be made every month if annual distribution of the company in Czech Republic is over 10 million Czech koruna, while at distribution less than 10 million koruna per year – once every three months.

VAT taxing in EU

VAT number enables you practically not to pay VAT when products are delivered within the EU. It should be remembered that only tax authorities can issue VAT numbers.

Council Directive 2006/112/ЕС dated 26th of November 2006 “On the common system of value added tax” is the core document regulating VAT taxing in EU.

VAT rate (VAT) is determined individually by every EU member state. Apart from the standard rates, there are also reduced rates (examples in the chart below). Besides, real rates may vary depending on the particular product type.

The following business transactions are taxed:

  • delivery (distributing) of goods;
  • purchasing products inside the Community;
  • rendering (implementation) of services;
  • products import.

VAT number registry in EU is required for legal running of trade business with European companies (as well as between them). VAT number registry is required when the sales volume, determined by the corresponding EU member state, is exceeding during last 12 months. Besides, one can register as the VAT payer on a voluntary basis.

Every EU country has its own categories of taxable products and services as well as rates. The registry numbers are as following:

Country

Rate Abbreviation
Standart Reduced
 Austria 20 % 12 % or 10 % USt.
 Belgium 21 % 12 % or 6 % BTW, TVA, MWSt
 Bulgaria 20 % 7 % DDS = ДДС
 Great Britain 20 % 5 % or 0 % VAT
 Hungary 27 % 5 % ÁFA
 Denmark 25 %   moms
 Germany 19 % 7 % MwSt./USt.
 Greece 23 % 13 % or 6,5 % ΦΠΑ
 Ireland 23 % 13,5 %, 9 %, 4,8 % or 0 % CBL, VAT
 Spain 21 % 8 % or 4 % IVA
 Italy 22 % 10 %, 6 %, or 4 % IVA
 Cyprus 19 % 8 % or 5 % ΦΠΑ
 Latvia 21 % 12 % PVN
Lithuania 21 % 9 % or 5 % PVM
 Luxembourg 17 % 14 %, 8 %, 3 % TVA
 Malta 18 % 5 % TVM
 Netherlands 21 % 6 % BTW
 Poland 23 % 8 %, 5 % or 0 % PTU/VAT
 Portugal 23 % 13 % or 6 % IVA
  Rumania 24 % 9 % or 5 % TVA
 Slovakia 20 % 10 % DPH
 Slovenia 22 % 9,5 % DDV
 Finland 24 % 14 % or 10 % ALV, Moms
 France 20 % 10 % or 5,5 % or 2,1 % TVA
 Croatia 25% 10% PDV
 Sweden 25 % 12 % or 6 % or 0 % Moms
 Czech Republic 21 % 15 % or 10% DPH
 Estonia 20 % 9 % km

On the EU territory the liberty principle of goods transportation is applied, which means that export and import in the EU are exempted from all customs duties, but other input taxes remain the same. So the VAT number allows almost not to pay VAT while products distribution within the EU. But VAT is discharged regardless of VAT registration if the products are sold within one country.

According to the general regulation, VAT must be paid by the end consumer of goods. If the end consumer has VAT number, he can qualify for tax deduction. Otherwise the company won`t have such a right.

There are two kinds of rates, let`s start with reduced one. The reduced rate is applicable only for certain goods and services, including provision, pharmaceutical goods and medical equipment, books, newspapers, passenger transport services and many others.

Incentive rate can be also applied for natural gas and electricity supplies if their implementation does not displace the competitive circumstances.

The major advantages of VAT registry in European companies:

  1. Your company has high trust level of contractors.
  2. VAT number provides an opportunity not actually pay the VAT in case of goods delivery within the EU. On the EU territory the liberty principle of goods transportation is applied.
  3. The use of European company as the means of investing on the EU territory.
  4. Engagement of European financial institutions.
  5. The opportunity of purchasing the real estate and getting a EU residence permit.
  6. There are two types of rates in VAT: standard and reduced. You can choose the rate type depending on the business activity of the company.

VIES System

While working with European companies it`s necessary to obtain VIES number.

VIES (VAT Information Exchange system) is a VAT information change system.

This registration helps countries within EU change information on all VAT operations centrally. VIES registry demands from companies to file accounts every month, with exception of companies registered outside of EU.

Summarized, VAT registry resembles “green light” for your company. This number gives you a range of opportunities. You can, for instance, save on VAT during goods delivery within the EU. Depending on business activity you choose the type of rate which is appropriate for you. Remember that every country has its own peculiarities in obtaining VAT number.

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