What is intra-EU VAT? Buying and selling within the EU
If you plan to do business with a member country of the European Union, you need to know what intra-EU VAT is and how it works.
Created to unify fiscal criteria, avoid the cascade effect and ensure the efficiency and transparency of the tax system, intra-EU VAT allows for fair taxation when importing or exporting products within the European Union.
Buying and selling goods or services is a major step in the growth of a company. It also means complying with a series of tax procedures and requirements.
Whether you are self-employed or own a company (regardless of its size), you need to know what this type of tax consists of, how it is applied depending on the type of transaction you carry out at the time of invoicing, and even how to calculate and recover it.
Let's get started!
What is intra-community VAT?
Value Added Tax (VAT) is the tax levied on certain products and services. When it is applied to commercial transactions between different countries of the European Union, then we speak of intra-community VAT.
Since each country has its own tax regulations (tax rate, declaration, etc.), the European Union decided to create this VAT in order to facilitate buying and selling operations between member countries. For example, the general VAT in Spain is 21%, while in Germany it is 16%, and so on with each EU country.
Tax requirements
In order to benefit from this type of taxation, it is necessary to comply with a series of requirements, including the following:
- Registration with the ROI;
- to have a NIF-VAT code.
Let's see what both requirements are about:
Registering with the ROI
The Register of Intra-Community Operators (ROI), also known as VIES (VAT Information Exchange System), is a census where all professionals and businessmen who wish to carry out commercial operations with one or more countries belonging to the European Union are registered.
Whether they are engaged in the purchase or sale of goods and services subject to VAT, or in the provision of services, the self-employed or entrepreneur must register with ROI. Otherwise, the corresponding tax must be invoiced to the issuing country.
NIF for intra-Community VATmanagement in Spain
Once you have registered with the ROI, the tax authorities will assign you a VAT number (NIF-IVA), which indicates that you are registered and can carry out VAT-exempt transactions.
The NIF-IVA is a number made up of the country prefix (ES for Spain) and a Tax Identification Number. This number allows you to check whether or not the company you are trading with is registered for invoicing purposes. To check this, all you have to do is go to the European Commission's website or the Tax Agency's VIES Census.
On the other hand, the NIF-VAT is used to record intra-Community transactions through form 349. This information must coincide with the information reflected in form 303 of VAT at the time of the Value Added Tax settlement.
How intra-Community VAT works or how it is applied
The application of the intra-Community VAT rules at the time of invoicing depends on the transaction being carried out (purchase or sale), the type of good being traded (product or service) and the customer with whom it is traded (business, professional or individual):
1. Sale of goods to companies or professionals
If both the seller and the buyer are registered in the ROI, VAT should not be applied on the invoice. Otherwise, the VAT of the issuing country is applied.
2. Sale of goods to private individuals
The seller must register as a trader in his customer's country if his annual sales exceed the threshold (35,000 to 100,000, depending on the country) and pay the VAT due in the country of destination. Otherwise, he must charge VAT in his own country.
3. Purchase of goods
The purchaser must declare the VAT as input VAT and, at the same time, as output VAT at the time of the quarterly tax assessment. This generates a "neutrality" effect, as if the product had been purchased in Spain. VAT will not be charged on the invoice.
4. Sale of services to businesses and professionals
As with the sale of goods to businesses or professionals, VAT will not be charged on the invoice, but the buyer will have to settle it according to the regulations of his country.
5. Sale of services to private individuals
The VAT of the seller's country must be applied. There are certain exceptions for telecommunications and electronics.
6. Purchase of services
As with the purchase of goods, the purchaser must account for VAT as if he were the supplier himself.
How to recover intra-Community VAT
It is possible to recover input VAT arising from business transactions with EU member states.
To do so, it is necessary to
- Keep a record of all transactions carried out, as well as proof of each of them (invoices).
- Have paid more than €50.
- Demonstrate that the transactions have been made as an investment to grow your business or company.
- Apply for recovery with the Tax Agency using form 360.
There are many regulations, exceptions and operations that must be taken into account when carrying out and invoicing an international transaction: limits on amounts, who you negotiate with, exemptions, changes in legislation, etc. The important thing is to always be up to date and comply with national, European Community and national regulations.
Tell us about your experience with intra-community VAT taxation in the comments 👇 .
Article translated from Spanish