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VAT in Europe

The structure of the VAT is harmonized within the EU. The basic legislation on the common system of VAT focuses on the harmonisation of EU countries internal legislation and establishes a common VAT structure, a uniform basis of assessment and minimum rates to be established by EU countries.

You will find here the summary of VAT obligations valid in all countries within the European Union.

1. VAT identification

Every taxable person must inform the tax administration when his activity commences, changes or ceases. Member States must take the measures necessary to ensure that foreign companies carrying out supplies of goods or services within their respective territory for which they are liable for the payment of the VAT, are identified by means of an individual number. Member States shall allow, and may require, the statement to be made by electronic means, in accordance with conditions which they lay down.

Each individual VAT identification number shall have a prefix in accordance with ISO code 3166 — alpha 2 — by which the Member State of issue may be identified. Check the validity of a VAT number here.

2. Invoicing

Every taxable person must issue an invoice where supplies are made to another taxable person and to non-taxable legal person, a payment on account is made for one of the above supplies and where distance selling provisions apply.

Member States can impose the obligation to issue invoices for other transactions to the extent these take place on their territory.

The invoices have to include all mandatory mentions stated in the VAT Directive.

The second VAT Directive on VAT invoicing has been implemented in all Members States since 01/01/2013. It aims to promote and further simplify invoicing rules by removing existing burdens and barriers. It establishes equal treatment between paper and electronic invoices without increasing the administrative burden on paper invoices and has the aim to promote the uptake of e-invoicing by allowing freedom of choice regarding the invoicing method. For a clear understanding of the main VAT invoicing rule changes as from 1 January 2013 a set of Explanatory notes has been written in 21 languages.

3. VAT returns

3.1 Periodical VAT return

Every taxable person must submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made. Member States shall allow, and may require, the VAT return to be submitted by electronic means, in accordance with conditions which they lay down.

The VAT return shall be submitted by a deadline to be determined by Member States. The tax period shall be set by each Member State at one month, two months or three months. Member States may, however, set different tax periods provided those periods do not exceed one year.

Member States are currently able to define the information which they consider necessary on a periodic VAT return. Across the EU, the periodic VAT return in different Member States varies between 6 [Ireland] and 99 boxes [Hungary].

3.2 Annual summarizing VAT return

In addition to periodic returns throughout the year, Member States may require taxable persons to submit an annual summarizing VAT return [art. 261 of the VAT Directive] concerning all transactions carried out in the preceding year. That return should provide all the information necessary for any adjustments. Annual  summarizing return is required notably in Austria, Croatia, Germany, Italy, Malta, Latvia, Luxembourg, Spain & Portugal. It has been abolished in Greece since 01/01/2014.

The purpose of the annual VAT return is therefore to provide the periodic information already submitted in a summarized form to allow for any annual adjustments. According to the European Commission, the practice of Member States is typically to demand more information on the annual return and has therefore proposed that Member States will no longer be able to require annual VAT returns as part of its proposal for a standard VAT return.

4. VAT accounting

Every taxable person must keep accounts in sufficient details for VAT to be applied and its application checked by the tax authorities.

5. Payment of VAT

Every taxable person must pay the amount of VAT due on each declaration.

The net amount of VAT due must, in principle, be paid when the return is filed. Member States may set a different date for the payment or require interim payments [e.g. Belgium].

6. Recapitulative statements

6.1 Recapitulative statement of exempt IC supplies of goods and services ["European Sales List"]

Every taxable person must submit recapitulative statements where exempt intra-Community supplies of goods and, from January 1st, 2010, intra-Community supplies of services for which the recipient is liable to pay the tax, are made.

A recapitulative statement must be drawn up for each calendar month within a period not exceeding one month and in accordance with procedure to be determined by each Member State.

Derogation: However, Member States may allow taxable persons to submit the recapitulative statement for each calendar quarter within a time limit not exceeding one month from the end of the quarter, where the total quarterly amount, excluding VAT for supplies of goods, does not exceed either in respect of the quarter concerned or in respect of any of the previous four quarters the sum of € 50.000 or its equivalent in national currency. This option will cease to be applicable after the end of the month during which the total value, excluding VAT, of the supplies of goods exceeds, in respect of the current quarter, the sum of € 50.000 or its equivalent in national currency. In this case, a recapitulative statement must be drawn up for the month(s) which has (have) elapsed since the beginning of the quarter, within a time limit not exceeding one month.

6.2 Recapitulative statement of IC acquisitions of goods ["European Purchases List"]

Member States may require that taxable persons who, in their territory, make intra-EU acquisitions of goods, or transactions treated as such, submit statements giving details of such acquisitions, provided, nevertheless, that such statements are not required in respect of a period of less than one month [art. 268 of the VAT Directive].Every taxable person must submit recapitulative statements where exempt intra-Community supplies of goods and, from January 1st, 2010, intra-Community supplies of services for which the recipient is liable to pay the tax, are made. European Purchases List is required notably in Poland, Spain, Hungary and Latvia.

 6.3. Annual Sales & Purchases Lists

Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons. Some countries [Portugal, Spain, Italy and Czech Republic as from 01/01/2016] require annual listing reporting all purchases and sales with local VAT registered companies. Belgium also requires annual sales listing but only for sales to VAT registered customers.

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