EU VAT Guide

An Expert's View about Consumption/VAT/Sales Tax in the United Kingdom

Posted on: 24 Jan 2012

With 27 EU Member States, each with their own VAT legislation to consider, VAT can be a time consuming and confusing task for international business.

About Accordance: Accordance was founded in 2005, in response to EU Europe’s rapidly changing VAT situation. Our aim VAT Compliance & Savings Guide to is simplify the experience of cross-border VAT There are currently 27 Member States within the EU; all are 2. Make proper use of available exemptions and the Reverse for businesses trading in Europe, through a policy required to comply with the EC Directive, which establishes a Charge of practical engagement with our clients and their basic framework for VAT across the EU, but local tax When supplying intangible services to customers in other EU indirect tax issues. authorities have flexibility on several areas, including: Member States the reverse charge is mandatory and additional report We reach across Europe, but manage all working requirements apply to the supplier.To comply, you have Standard and reduced VAT rates to have your customer’s VAT number. Failing to deal with the from an accessible and responsive hub in the UK. VAT Registration liabilities reverse charge correctly can lead to tax authority penalties and Accordance is a unified VAT Compliance and Liability to account for VAT and the Reverse Charge a query from your customer. Consulting practice, with a focus on cross-border Invoicing guidelines VAT reclaim allowances For goods the exemption is also mandatory so long as the relevant transactions. We provide practical, commercially Goods and services exempt from VAT proof is obtained – the supplier must have a relevant VAT number beneficial VAT assistance to companies across Reporting requirements of the customer and proof that the goods were transported. the EU and beyond. Recent ECJ cases such as “Eurotyres” and “Facet” reinforce the It is necessary for international companies to meet their VAT ob need to get this correct.ligations, and ensure they are not being exposed to financial penalties and liabilities. With 27 EU Member States, 3. Review your international VAT Registration profile each with their own VAT legislation to consider, it can be a Where your business is trading internationally, you may need to time consuming and confusing task for international business. register for VAT, allowing the reclaim of local VAT incurred Mo through VAT returns. The use of a general reverse charge canst businesses are looking to identify savings opportunities and remove the need for a supplier to be registered for VAT as a improve cash-flow but it is also important that businesses a non-established trader. These differ from one Member State tore VAT compliant to avoid risks of fines and penalties. another and within a Member State can differ for goods or VAT Compliance Obligations services. Keeping up to date is therefore vital to achieve VAT It is essential for firms trading in Europe to ensure that they compliance. Where businesses cease trading in a particular account for the correct amount of VAT in the correct Member country, de-registrations can be applied for, avoiding the ongoing State at the correct time. Failure to do so can result in financial administrative burden of VAT reporting costs. penalties and exposure to additional VAT costs which will directly affect profitability. Customer relationships can also be 4. Review international business contracts problematic if VAT is not accounted for correctly as companies w International business contracts must consider multiple sets ofill have to spend valuable time resolving issues which, with VAT regulations; however, it is often the case that with new effective management, need not have arisen. customers and suppliers, VAT is not taken into account. It is possible that, by reviewing contracts, VAT registrations can be VAT Savings Opportunities avoided and VAT cash-flow improved. International businesses need to consider VAT regulations in multiple countries to avoid VAT becoming an unnecessary cost. 5. Get VAT reporting right For many businesses, savings can me made once they become VAT reporting guidelines vary across Europe. In addition to VAT aware of their VAT obligations, avoiding the payment of VAT returns, many businesses will need to file Intrastat and EC Sales that has been incorrectly charged and cannot be recovered, as Lists, and it is crucial that compliant reports are submitted by the well as taking the opportunity to recover VAT that has been tax authority deadlines to avoid risks of fines and penalties. charged to the business. 6. Reclaim VAT through the EU Refund Directive Get your business VAT compliant and identify savings International businesses often incur foreign VAT, but many avoid opportunities: VAT claims because they believe it will be too complicated or time consuming. If your business has previously overlooked 1. Review your VAT liability international VAT recovery, it may be easier than expected to When supplying goods or services it is important that you claim back the VAT – especially because of the introduction of Contact: understand if it is you or your customer who must account for the electronic portal in 2010. Tower Point, VAT. 44 North Road, The 7. Ensure internal ERP systems are compliant same principle applies when buying goods or services. The paymen To Brighton, ensure your international business is VAT compliant, it is t of wrongly-charged European VAT is a big issue for many essential that VAT coding on ERP systems remains accurate. East Sussex, firms. Serious cash-flow issues are created unnecessarily, and Altering business flows and rapidly changing VAT regulations you have no right to recover this VAT. Instead you must BN1 1YR ge make this challenging, so it is vital to review systems to ensuret a credit note from your supplier. Additionally, you may have T: +44 (0)1273 573 950 an you are up to date. obligation to account for VAT using the reverse charge . F: +44 (0)1273 573 951 © Accordance
Posted: 24 January 2012

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