The following is a summarized International VAT guideline for deliveries and services: local VAT number requirements, reverse charge, cross border VAT and VAT for e-commerce. Here you find the answers for most day-to-day questions, but we advise to discuss your transactions with your tax consultant in more detail.
The European VAT Directive 2006/112/EC constitutes a binding framework of the European Union for national legislation. However, although the European Commission tries to reach harmonization, there are national differences in interpretation, implementation, national VAT rules and VAT rates.
The tax is paid by the consumer and completely forwarded to the state through the chain of suppliers. A supplier receives the sales tax, applies the input tax in the VAT return and pays the remaining difference to the tax administration.
In order to avoid that a foreign supplier who delivers from abroad does not pay VAT, the last local customer has to declare and pay the sales tax in his place (reverse charge system for import VAT or for services).
A tax free delivery of goods or services should only be done to enterprises. The entrepreneur (contractor) status in the EU is defined by an international VAT number. Authorities of other States may submit another certificate to prove entrepreneurship instead of a VAT number.
If there is a national delivery from another country to a destination in the same country, a national VAT number of that country is required.
Basic Rules – Territory
The rules about VAT do not only concern declaration and taxation but also the jurisdiction where decisions are executed.
Deliveries of goods: the movement of goods decides, which form of VAT is applicable (cross-border or local delivery), but the place of the issuer of the invoice or the recipient of the invoice are not relevant for VAT purposes.
- Goods remain physically in the same country: national delivery (national VAT number, even when the invoice goes abroad)
- Cross-border export delivery to entrepreneurs outside the EU: no VAT
- Cross-border delivery to other EU countries:
- destination principle for deliveries to entrepreneurs (VAT number; zero rate, reverse charge),
- destination principle for deliveries to private sector in the area of mail order business or new vehicles
- origin principle for other deliveries to private sector
- Cross-border import delivery from entrepreneurs outside the EU: VAT taxable at the customs in the country where the goods enter into the European Union (standard rate or reduced rate depending on the legislation of this country).
- Cross-border import delivery from entrepreneurs in other EU countries: VAT number; zero rate, reverse charge.
- Cross-border services to companies in the EU:
- Destination principle for deliveries to entrepreneurs, Reverse Charge clause!
- National exemptions
- Transport services: where the transport takes place.
- Services to private customers: in the place of business, at the residence of the customer.
- Real estate related services: place of the real estate.
IOSS and MOSS:
- IOSS (Import One Stop Shop): from 01.07.2021, VAT IS PAYABLE for all commercial goods imported into the EU, the free threshold of 22 Euro is eliminated. If suppliers from the EU or from non- EU countries use an electronic interface to sell imported goods with a value less than 150 Euro to buyers in the EU, the entity with the interface is considered tax subject. In the IOSS; the VAT for all such sales to buyers within the EU can be registered in one platform at one member state. For the sales, the tax rate of each destination country has to be applied. Suppliers that are not based in the EU normally need to appoint an EU-established intermediary to fulfill their VAT obligations under IOSS.
- MOSS (Mini One Stop Shop): also allows to submit the VAT declaration for multiple EU countries in just one EU country, without registering in the destination countries. The target group are service providers who deliver digital services to non-taxable persons.
- There are special rules for activities with low annual turnovers (less than 10.000 Euro in the current and the preceding year): to have reduced bureaucratic burden, they are allowed to charge VAT to their customers at the rate of their own country, declare and pay it there.
Intra EU supplies to companies and transports of merchandise abroad within a company require:
- VAT number of the supplier in the country of departure and VAT number of the recipient in the destination country.
- Evidence that the VAT number of the business partner has been checked
- Note “Exempt (zero rated) Intra-EC supply”
- Book and documentary evidence (including proof of shipment)
- Summary report (quarterly)
- Intrastate reports if the limits are reached
- Warning: if the VAT number used by the purchaser is not from the country of destination, in the opinion of the ECJ of 22.4.2010 (C-536/08 and C-539/08), no deduction is allowed. In the third-country VAT will be charged and might only be refunded if there is a proof of taxation in the destination country.
Transactions in a chain:
- If there is one delivery combined with several transactions, only one delivery qualifies as an intra-Community cross-border supply, the others have to qualify as national transactions.
- Requirements: 3 parties, VAT numbers from 3 different EU Member States, reference to Article 141 of VAT Directive.
- The first supplier delivers VAT exempt intra Community supply to the intermediary, and in addition there is proof of shipment to the final recipient. For simplification, the final recipient ows the VAT instead of the intermediary who can avoid several registrations.
- Attention: in some legislations triangular transactions are not allowed if B is established in the destination country of C, even if the goods move in 3 countries.
Services and work performance (reverse charge):
- Destination principle, VAT numbers, clause “Reverse Charge”
- Services to non-entrepreneurs: place of the service provider.Exception: electronic services (place of the recipient)
- Some details of the reverse charge processing is regulated differently in the countries. Basically, the tax liability is transferred to the recipient who at the same time declares the input tax.
- if the recipient of a service which he has obtained from abroad is not properly registered for VAT accounting and if a certain amount defined in the local law is exceeded, VAT is payable on the value of imported services without the possibility to claim input tax on it.
- a similar situation is the case with tax exempt entrepreneurs who can claim no or only a part of input tax.
Supply of work:
- If the work is completed at the start of transport: taxation in the country of departure as a supply
- Production, finishing, main assembly at the customer: taxation in the country of destination. Often there are different national regulations: either reverse charge (e.g. Austria) or registration for national VAT.
- In some countries, parts of a work that is finished in the country of destination have to be imported by the supplier and not by the customer, in order to qualify for input tax.
Production in an EU country:
- Contract manufacturing and subsequent delivery to the recipient: normal delivery
- Deliveries from the production site can be submitted to national VAT (domestic delivery) or intra-Community supplies.
- Local Purchases often require a local VAT number, intra-Community purchases require an international VAT number
- Shipping trade arrangements (delivery to non-entrepreneurs):
- Delivery threshold: Settlement in the destination country, if this threshold is exceeded by the supply for this country.
- Acquisition threshold: obligation for registration upon reaching certain amounts of intra-Community purchases.
(Updated July 2021)