Information on VAT
Tax Lawyers in Europe
In the EU, value-added tax (VAT) is a general tax that applies, in principle, to all commercial activities involving the productionand distribution of goods and the provision of services. Ultimately borne by the final consumer, it is a consumption tax and not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain. And it is collected in instalments, via a system of deductions whereby taxable persons (i.e. VAT-registered businesses) can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities. This mechanism ensures that the tax is neutral regardless of how many transactions are involved.
For VAT, the EU’s role is confined to mandating that the standard minimum rate must be 15% and optional reduced rates at least 5%. So rates vary among EU countries and between certain types of goods or services. EU governments are free to apply a different rate from the 15% minimum and set a higher standard rate, to suit their specific national circumstances. And they can apply reduced rates for certain specified goods or services. These are essentially the necessities of daily life, such as food and medicine, or goods and services that are not in competition with those from other EU countries, e.g. in the accommodation sector. Exemptions are also allowed for public services (hospitals, education sector, etc.).
To ensure disparities within the EU are not too great, as far as possible the Commission is limiting exceptions to these rules, in a bid to achieve the greatest possible harmonisation. However, since 2000, it has been mainly concentrating on simplifying, modernising and rationalising the current rules.
And increasing administrative cooperation between member countries to clamp down on fraud, which often takes advantage of the current system’s complexity.
Since 1 May 2004 the EU has had ten new member countries. They are still covered by transitional provisions or derogations on taxation.
The most reliable source of information on current VAT rates for a specific product in a particular EU country is that country’s VAT authority. However, you can also find information in this short summary document from the Commission
VAT Recovery
Companies operating across borders may incur foreign VAT which they cannot reclaim through their domestic VAT returns. multiVAT can help. Its offices across Europe are expert at getting cash back quickly and without fuss.
VAT Registration
Businesses trying to trade in different countries often hit the requirement to obtain a local VAT number. multiVAT can take care of this. It has obtained hundreds of VAT numbers for clients through its staff on the ground working with the local VAT authorities.
VAT Returns
Once registered, companies are required to submit periodic filings and make regular VAT payments. Each country has highly detailed requirements, enforced with tough penalties and interest charges for infringement. multiVAT is on top of the rules, and can help ensure businesses stay fully compliant.