Questions are great but only if you know the answers.

FAQ & Glossary

Frequently Asked Questions

We ship goods from the UK to customers based in different EU countries. Do I have to charge UK VAT or the VAT rate of the country I am sending the goods to? Can our sales be VAT zero rated? VAT rules are so complicated…

You are right. European VAT regulations are not easy to understand nor to apply. The correct VAT treatment will actually differ according to whether your clients are VAT registered businesses or private consumers.

Your sales may be VAT zero rated if your clients are registered for VAT in the countries of destination, but the conditions for VAT exemption are very strict. We of course are available to discuss this with you.

Can I recover the VAT charged by my suppliers?

VAT is supposed to be neutral for businesses. It is more than likely that VAT charged by your suppliers will be refundable. We can study your supplier invoices and confirm with you in a short amount of time whether you will be able to claim a VAT refund.

How can I recover VAT paid on goods that I have imported?

If your company is based in the UK, import VAT is refundable through HMRC. We can assist you with this if necessary.

What are the tax returns that need to be filed in each country?

If your company sells goods locally to some EU countries (for example from a local warehouse), you may have to submit local VAT returns as well as possible other specific forms (other local taxes, levies on certain kinds of goods, WEEE, …). It is therefore very important to identify these countries and to analyse your flows of goods in order to fully answer this question.

Do I have to file Intrastat returns?

Intrastat returns must be filed if your company ships goods from and to countries within the European Union and if local thresholds are exceeded. These thresholds are different in all EU countries. We can assist you should you need help analysing if this is necessary for your company.

How to be sure that my invoices are compliant with local rules?

The only thing to do is to refer to the local invoice rules of the country. Some countries impose the obligation to indicate very specific statements on invoices. Simply inform us of the countries in which your company has been carryout business transactions and we will indicate which statements must be mentioned on your invoices.

Which VAT rate to apply?

If your operations are subject to local VAT, it is important to apply the right VAT rate in order to avoid penalties. For some categories of goods, reduced or super reduced rates can apply. The goods concerned by these reduces rates are mainly food, beverages, energy, … It is therefore very important to be sure that your goods may benefit from reduced VAT rates.

Can I have a stock in Europe?

Of course your company can hold a stock in Europe. Please however note that storing goods in EU Member States obliges you to respect local VAT regulations and possibly a local VAT registration.

Can I appoint a fiscal representative or a tax agent?

You can appoint a tax agent in the countries where your company has business transactions. Please however ensure that the service provider you choose has the necessary knowledge and experience needed in cross border VAT. Always ask to receive written answers to your questions and check their financial statements.

Glossary

13th Directive

A European Council directive (86/560/EEC) which harmonises the laws of member states which relate to turnover tax arrangements for the refund of VAT to taxable persons who are not established in an EC territory.

ad valorem tax

See value added tax

B2B

Business to business

B2C

Business to consumer

Brexit

A term used to describe the withdrawal of the United Kingdom from the European Union. The process began with a UK-wide referendum which was held on 24 June 2016. After years of negotiations, the UK officially left the EU on 31 January 2020. However, the relationship continued under existing rules until 31 December 2020. This is known as the ‘transition period’.

call-off stock

A supply of goods which are held by the client that will use them. The client is only invoiced when they take goods from the stock. The supplier of the goods does not have to be VAT registered in the country where the client is located.

CoE

See Council of Europe

Common Market

See European Single Market

consumer tax

See value added tax

Council of Europe (CoE)

An international organisation which includes 47 member states. The Council of Europe cannot make laws but it can enforce selected international agreements. An example is the European Court of Human Rights which enforces the European Convention on Human Rights.

customs agent/broker

distance selling regime

The EU rules which govern transactions between a business and a private citizen. To reduce the administrative burden on companies, a national VAT threshold is set by each country. A foreign company which exceeds the threshold must apply for a VAT number in that country. The limit is typically around €35,000, but can be as high as €100,000.

EC

See European Commission

ECC

See European Economic Community

Economic Operators Registration and Identification number (EORI)

A registration and identification number which is required by businesses which import or export goods to or from the EU.

EFTA

See European Free Trade Association

EOR

See exporter of record

EORI number

See Economic Operators Registration and Identification number

EU

See European Union

EUCU

See European Union Customs Union

European Commission (EC)

The executive branch of the EU. The EC manages the day-to-day business of the EU.

European Economic Community (ECC)

A regional organisation established to bring economic cooperation to member countries. The ECC was founded under the Treaty of Rome in 1957. On the formation of the EU in 1993, the EEC was incorporated and renamed the European Community.

European Free Trade Association (EFTA)

A regional trade association and free trade area which includes four European countries which are not members of the EU. The countries are: Iceland, Liechtenstein, Norway, and Switzerland. These states are part of the European Single Market and the Schengen Area. They are not part of the European Union Customs Union.

European Single Market

A market which comprises the 27 member states of the EU. A number of other countries (including Iceland, Liechtenstein, Norway, and Switzerland) participate with some restrictions. Members of the single market agree to guarantee the free movement of goods, capital, services, and labour.

European Union

A group of 27 nations that have agreed to create a political and economic union. single market which ensures the free movement of people, goods, services, and capital. Compare with European Community.

European Union Customs Union (EUCU)

A customs union which includes all EU member states, Monaco, and the UK (until 31 December 2020). There are no tariffs or trade barriers between the member states. However, the EUCU can apply a common external tariff on goods entering the Union.

exporter of record (EOR)

The person or company that is named on export documents. They are not necessarily the owner of the goods. The EOR bears responsibility for the export and ships the product to another country. The EOR is also responsible for ensuring the export rules and regulations are followed. That may include guaranteeing a shipment leaves port on time, addressing problems which occur while the goods are in transit, and handling customs enquiries from the country of export. An EOR is responsible for the nature and quality of the goods being shipped. If irregularities are found (for example, poor quality goods or forbidden substances) the EOR is responsible and will be pursued by the relevant authorities.

fiscal representative

An agent appointed to handle financial arrangements in another country or jurisdiction. A representative bears sole fiscal responsibility for the operation and is subject to the local rules of the country. Compare with tax representative.

four freedoms

A basic tenant of the EU. The four freedoms guarantee the free movement of goods, capital, services, and labour.

importer of record (IOR)

The person or company that imports a product. Many governments recognise the IOR as the owner or purchaser of the imported goods. The IOR is responsible for all documents required by the customs authorities in the import country. They must also pay any import duties.

Incoterms®

A series of pre-defined commercial terms which are published and maintained by the International Chamber of Commerce (ICC). The terms are commonly used to ensure clear communication around the costs, risks, and tasks required for the successful transportation and delivery of goods between countries.

Internal Market

See European Single Market

International Commercial Terms

See Incoterms®

IOR

See importer of record

member state

One of the 27 countries which are members of the EU.

NETPU

See Non-established Taxable Person’s Unit

no-deal Brexit

A scenario in which the Brexit transition period expires on 31 December 2020 with no reciprocal deal regulating the free movement of goods, capital, services, and labour between the EU and the UK.

non-established taxable person’s Unit (NETPU)

A company that is registered for VAT in a country but does not have a substantial physical presence in that territory. The company pays taxes in the country where they are established.

reverse charge

A mechanism which enables the buyer of goods or services to settle VAT costs directly with the revenue office and not the supplier. The recipient of the goods or services reports their purchase (input VAT) and the supplier’s sale (output VAT) in their VAT return. The concept was created by the EU to simplify trade within the single market.

sales tax

See value added tax

Schengen Area

An area covering 26 countries which have agreed to abolish border controls at their mutual borders.

simplification rules

A general term for the VAT rules which exclude VAT from some invoices. The rules prevent non-authorised companies from collecting VAT, thereby limiting the chances of fraud or involuntary mistakes.

single market

A market in which there are no physical or administrative borders. The EU is an example of a single market. It allows the free movement of goods and services without the intervention of customs.

tax representative

An agent appointed to handle tax arrangements in another country or jurisdiction. Compare with fiscal representative.

transition period

A period in which the EU and UK continued their existing relationship pending the formulation of a new trading agreement. The transition period began on 1 February 2020 and ends on 31 December 2020.

triangular operations

An EU mechanism to simplify the trade involving more than two companies. The mechanism simplifies the rules governing invoicing and VAT.

value added tax (VAT)

A tax which is applied to purchases. The rate of VAT varies from country to country, even within the EU.

Also known as ad valorem tax, consumer tax, and sales tax.

VAT

See value added tax

VAT agent

A specialist agent appointed to handle the VAT affairs of a business in a jurisdiction outside the business’s home country.

VAT Information Exchange System (VIES)

A web-based platform which allows businesses to validate the VAT number of economic operators registered in the EU for cross border transactions on goods and services. See https://ec.europa.eu/taxation_customs/vies/

VIES

See VAT Information Exchange System

withdrawal agreement

An agreement between the EU and the UK which outlines how the two entities will interact during and after the transition period.

World Trade Organisation (WTO)

An intergovernmental institution that regulates international trade between countries.

WTO

See World Trade Organisation

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How can we help you today?

Do you have questions about how RMB can help your business? Send us an email and we’ll get in touch with you shortly, our VAT experts are always happy to help. You can also contact us by phone: +33 3 20 25 70 70.

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