For many non-EU businesses starting to trade in the EU can be a minefield. One of the most daunting issues to contend with is understanding the complex tax rules, especially the VAT rules and regulations which in many cases will apply from the very first sale made.
In most EU countries a nil VAT registration threshold applies to non-established (i.e. a business that is not incorporated in their country) businesses. This means that a VAT registration must be applied for as soon as trading commences, even if the sale value is only £1, €1 or $1.
In order to sell their goods or services to an EU customer, the business therefore needs to know:
- the VAT rate or liability of the supplies it makes,
- what the VAT invoicing requirements are, and
- how and when to complete the VAT return.
Not only that, the VAT rules vary from one EU country to another! So the more EU countries the business sells into the more rules and regulations there are to master. Not to mention the VAT reporting deadlines needing to be met too.
One way to make this whole process simpler could be to appoint a tax representative (or fiscal representative) in each country.
A tax representative is responsible for:
- keeping the VAT records and VAT accounts,
- accounting for VAT on the business’ behalf, and
- is jointly and severally liable for any VAT debts incurred.
Whilst in the UK it is optional for a non-established business to engage a tax representative, it is compulsory in some EU countries.
If you want to find out more about these requirements, we have detailed training content in our VAT for non-EU Importers of Goods course.