When should you register for VAT in another EU jurisdiction?

The European Union’s integrated VAT system is designed to minimise the requirements for businesses to register for VAT in more than one member state. Even so, there are circumstances when registration in another EU country may still be required. Do you know what those are?

Firstly, you might need to register in another jurisdiction if you sell goods to consumers in the EU and you breach the distance selling threshold in a given member state. These thresholds vary from €35,000 to €100,000. Once the threshold in a given country is exceeded in any 12-month rolling period, you have to register and charge consumers in that jurisdiction local rates of VAT. Note that with effect from January 2021, the distance selling rules will be replaced with a new ‘one stop shop’ solution, under which local rates of VAT will apply immediately.

Transfers of your own goods can also bring you into the VAT net. If, as a VAT-registered business, you transfer your own goods to another EU member state, that will be deemed a taxable transaction and you may need to register for VAT in that jurisdiction. However, there are exemptions for short-term transfers of items like tools and equipment that will be used in the other member state and then brought back.

Most providers of intermediary services should also take care. If you arrange for services to be supplied to consumers, your fees for arranging the service are taxable in the location where the service is actually carried out – unless you are a tour operator within the Tour-Operators Margin Scheme (TOMS).

Other situations where you may need to charge VAT and register in another EU member state include:
  • Admission to events: For example, if a UK membership organisation arranges a conference for its members in Barcelona (or elsewhere in the EU), admission charges and related ancillary services would all be subject to VAT in Spain (or the relevant local country).
  • Services in connection with land: These are always taxable where the land is physically located. For example, a French property surveyor carrying out a review of a property in Holland would be liable to charge Netherlands VAT to their client, no matter where that client is located.
  • Short-term hire of a means of transport: This is subject to VAT in the country where the vehicle is made available to the consumer.
  • Installation of goods: If you install goods for a customer in another EU state, you may be able to take advantage of simplification measures allowing your local customer to account for the associated VAT. However, not all member states allow this, so a local registration maybe required.
Remember, if you’re the supplier in a business relationship, it is your responsibility to charge VAT on your supplies correctly. You shouldn’t rely on what your customer tells you to do, so take professional advice if you’re unsure of the right approach. It’s always worth checking, particularly if you are new to cross-border transactions or if the nature of your supplies change.

Finally, what happens if you incur input VAT in other member state? Assuming your supplier has charged you the VAT correctly, your VAT cost should normally be recoverable under the EU VAT Refunds system, even if you don’t have a local VAT registration. But if the VAT was not correctly charged you’ll need to recover it from the supplier – not the tax authority concerned. So again, it’s worth checking all is in order before making a significant payment or committing to a contract.

For a free, no obligation, VAT risks and opportunities meeting to discuss your circumstances, please contact Sarah Friend.
 

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