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VAT, GST, and Sales Tax

European Union

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The chapter below summarizes the value-added tax (VAT) rules for the European Union (EU) as a whole. For more detailed information, see the chapters summarizing the VAT systems in each of the EU Member States, where you will also find EY VAT contacts listed.

Indirect tax contacts

 Gijsbert Bulk                                                     +31 88 40 71175

  (resident in Netherlands)                               gijsbert.bulk@nl.ey.com

 Kevin MacAuley                                               +44 20 7951 5728

  (resident in United Kingdom)                         kmacauley@uk.ey.com

 Steve Bill                                                            +44 (0) 7768 035826

  (resident in Luxembourg)                               sbill@uk.ey.com

A. The territory of the European Union

At the time of preparing this chapter, the European Union (EU) consists of the following 28 Member States:

Austria                            Germany                    Netherlands

Belgium                          Greece                       Poland

Bulgaria                          Hungary                     Portugal

Croatia                             Ireland                       Romania

Cyprus                             Italy                           Slovak Republic

Czech Republic              Latvia                        Slovenia

Denmark                         Lithuania                    Spain

Estonia                            Luxembourg              Sweden

Finland                            Malta                         United Kingdom

France

Of these 28, 13 are sometimes referred to as “new Member States”: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia (joined 1 May 2004); Romania and Bulgaria (joined 1 January 2007); and Croatia (joined 1 July 2013). A referendum on the UK’s membership of the EU was held on 23 June 2016, in which voters in the UK decided to leave the EU. The UK Government invoked Article 50 on 29 March 2017, triggering the formal process to withdraw from the European Union, to leave on 29 March 2019.

B. Goods in the Single Market

On 1 January 1993, the Single Market was introduced in the EU. Under the rules of the Single Market, goods may move freely between Member States without hindrance, including customs controls. As a result, the concepts of “import” and “export” no longer apply to cross­border trade between Member States.

Imports and exports. In the EU, the term “export” applies to the supply of goods exported from a Member State to any country outside the EU (also referred to as Third Countries). The term “import” applies to goods imported into a Member State from any country outside the EU.

After goods are imported into the EU, they are in “free circulation,” which means that they may travel within the EU without further payment of customs duties or further border controls.

Intra-Community supplies of goods to nontaxable persons. “Nontaxable persons” are any persons or legal entities that are not registered for VAT. In the EU, VAT is generally charged on supplies of goods made to nontaxable persons using the “origin principle,” which means that VAT applies in the Member State where the supplier of the goods is established. Consequently, the VAT rate charged is the rate that applies to the goods in the supplier’s Member State, not the rate that would apply in the customer’s Member State. For example, if a Danish tourist buys a dress in a shop in Paris, she pays VAT at the French standard rate of 20%, not at the Danish standard rate of 25%, even if the dress is subsequently “exported” to Denmark. However, exceptions to this rule apply for “distance sales of goods,” sales of “new means of transport” and sales to “nontaxable legal persons” (see below).

Distance sales. A “distance sale” is a sale of goods dispatched or transported by (or on behalf of) the supplier from one Member State to specific types of customers in another Member State who are not registered for VAT, such as nontaxable persons. Distance sales commonly include sales of goods made by mail­order catalog and goods sold online via the internet.

Nontaxable persons generally bear VAT as a cost. Because they do not charge VAT on sales, they are not permitted to offset VAT paid on purchases. Consequently, for nontaxable persons, the rate of VAT charged directly affects the cost of the goods purchased by them. With the introduction of the Single Market, it was feared that the application of the origin principle of taxation could lead to distortions of competition and the loss of VAT revenues for some Member States, as nontaxable persons would have an incentive to purchase goods from suppliers located in the Member State with the lowest VAT rate. Consequently, to avoid competition being distorted by different VAT rates, special rules were introduced for “distance sales” made to nontaxable persons (and certain taxable persons who are not registered for VAT in their home countries).

If the total value of supplies by a distance seller to customers in another Member State exceeds a certain turnover threshold, the distance seller must register for VAT in that other Member State (known as the “country of destination”). VAT is then chargeable on the supply of the goods in the country of destination, at the rate applicable in that country. The relevant threshold applicable in each Member State is provided in the Member State’s respective chapter.

Distance sellers may also opt to be taxed in the country of destination of the goods even if their sales do not exceed the distance­selling threshold. Otherwise, until the threshold is reached, the “origin principle” still applies.

Please note that significant changes in the distance selling regime have been adopted by the ECOFIN Council on 5 December 2017 and will be coming into force in two stages in 2019 and 2021 (see the Digital Single Market section below).

Intra-Community trade between taxable persons. A “taxable person” for the purpose of intraCommunity trade is generally any person or legal entity that is registered for VAT in the EU. Because no customs controls exist between Member States in the Single Market, intra­Community transactions between taxable persons are no longer termed “imports” and “exports” (see Imports and exports). Instead, they are referred to as “intra­Community acquisitions” and “intra­

Community supplies.”

In general, VAT is charged on the “destination principle” on cross­border supplies of goods made between taxable persons. Under this principle, VAT is not chargeable in the Member State from where the goods are supplied (known as the “Member State of dispatch”), but is chargeable in the Member State where the goods are delivered (known as the “Member State of arrival”).

Intra-Community supplies. An intra­Community supply of goods is “zero­rated,” i.e., exempt with credit in the Member State of dispatch. This means that no VAT is chargeable, but the supplier is entitled to deduct VAT paid on purchases connected with the supply. The supplier must be able to prove that the goods have been dispatched to a taxable person in another Member State.

The supplier must also quote the customer’s EU VAT registration number, including the country prefix (for example, BE for Belgium) although exceptions are possible in specific circumstances. The evidence required varies among Member States. Information about the evidence required in each Member State is provided in the chapters of the respective EU countries.

Intra-Community acquisitions. An intra­Community acquisition is an acquisition of goods from another Member State by a taxable person. An intra­Community acquisition is taxable initially in the Member State that issued the VAT identification number unless the person acquiring the goods can establish that VAT has been accounted for in the Member State of arrival at the rate of VAT applicable in that country.

Acquisition tax is self­assessed by a taxable person as output tax (VAT on sales). If the acquirer is entitled to recover the VAT on the acquisition as input tax (that is, VAT on purchases), the acquirer may offset the input tax at the same time as declaring the output tax. Consequently, an acquirer that deducts input tax in full does not actually pay any VAT in connection with an intraCommunity acquisition.

If a business makes an intra­Community acquisition of goods in a Member State where it is not registered for VAT, it may be required to register there.

Domestic reverse-charge mechanism. In order to combat fraud, Member States may also apply similar provisions whereby the customer accounts for the VAT on purchases for domestic supplies of certain goods susceptible to fraud, namely mobile phones, integrated circuit devices, game consoles, tablet PCs and laptops, cereals and industrial crops, and raw and semi­finished metals. Where the customer is entitled to recover the VAT on the purchase as input tax, then the customer can offset the input tax at the same time as declaring the output tax. A customer that deducts input tax in full does not pay any VAT in connection with domestic reverse­charge supplies.

On 20 December 2018, the Council adopted a proposal that will allow Member States that are most severely affected by VAT fraud to temporarily apply a generalized reversal of VAT liability. Member States will be able to use the generalized reverse­charge mechanism, only for domestic supplies of goods and services above a threshold of EUR17,500 per transaction, only up until 30 June 2022, and under very strict technical conditions. In particular, in a Member State that wishes to apply such a measure, 25% of the VAT gap has to be due to carousel fraud. Among other requirements, this Member State will have to establish appropriate and effective electronic reporting obligations on all taxable persons, in particular those to which the mechanism would apply. The generalized reverse­charge mechanism may only be used by a Member State once it meets the eligibility criteria and its request has been authorized by the Council.

Branch transfers. A transfer of goods between different parts of the same legal entity is not generally treated as a supply for VAT purposes (for example, no VAT is charged on a transfer of goods from a factory to a warehouse owned by the same company within the same Member State). However, this rule does not apply to transfers of own goods across borders within the EU. A taxable person is deemed to make an intra­Community supply and an intra­Community acquisition if the person transfers goods between different parts of a single legal entity that are located in different Member States. For example, a deemed acquisition may occur when goods are moved between branches of the same company located in different countries or when goods are stored in a warehouse in a different country after being manufactured but before being sold. If a deemed acquisition occurs, the person transferring the goods may need to register for VAT in both the Member State of dispatch and the Member State of arrival. Further information about the requirement to register for VAT is listed in the chapters of the respective EU countries.

Certain transfers are excluded from the provision discussed above, either because they are deemed not to be acquisitions (see Transfers deemed not to be acquisitions) or because the goods are exempt from VAT.

Transfers deemed not to be acquisitions. Not all intra­Community movements of own goods qualify as acquisitions. Exceptions include the following transfers:

  • Goods to be installed or assembled for a customer in another Member State
  • Goods transported to another Member State under the distance­selling rules
  • Goods that will be exported outside the EU from another Member State or dispatched to another Member State (that is, the goods are temporarily in the second Member State)
  • Goods sent to another Member State for processing (provided that the goods are returned after processing)
  • Goods temporarily used in another Member State for a supply of services made there
  • Goods used temporarily (that is, for less than two years) in another Member State, provided that customs duty relief would be available if the goods were imported from outside the EU
  • Goods acquired from a person not registered for VAT, unless the goods acquired are a “new means of transport” (see New means of transport) or are subject to excise duties (such as alcohol and tobacco products)

Triangulation simplification (ABC transactions). A “chain transaction” involves goods that are sold to different parties in a series of transactions, but are delivered directly from the first vendor in the chain to the final purchaser in the chain.

If three taxable persons that are registered for VAT in different Member States enter into a chain transaction, special “triangulation” simplification rules may apply. These transactions are sometimes referred to as “ABC transactions.” For example, manufacturer A in Spain sells goods to distributor B in France but delivers them directly to B’s customer, retailer C in Italy. In these circumstances, the triangulation simplification rules may be applied. Under the normal intraCommunity rules, B makes an intra­Community acquisition in C’s country in these circumstances. However, under the simplification rules, B may choose not to register for VAT in C’s country and, instead designate C as being responsible for the VAT due. In addition, B must indicate to A that the simplification rules are being applied and include this information on its invoice to C. In some Member States, B may also be required to notify the VAT authorities that it has chosen to use the simplification rule rather than register for VAT there. Following case law of the European Court of Justice, careful consideration must be given to which party is responsible for transporting the goods to determine whether the simplification may be used because simplified triangulation applies only if the cross­border transport of the goods is arranged between parties A and B.

In some Member States, the triangulation simplification rules do not apply if more than three parties are involved in the chain.

“Quick fixes” pending introduction of a “definitive” system for the VAT treatment of IntraCommunity supplies of goods to taxable persons. At the time of preparing this chapter, discussions are ongoing in the EU Council on a definitive VAT system to replace the current “transitional” VAT arrangements, which have been applied since 1993. It has been proposed that this new system should be based on taxation in the country of origin at the rate applicable in the country of destination.

Pending introduction of the new VAT system, on 4 December 2018, the ECOFIN Council adopted the following four adjustments to the EU’s current VAT rules to provide a short­term solution for specific problems:

  • Call­off stock: a simplified and uniform treatment for call­off stock arrangements will be introduced where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another Member State.
  • VAT identification number: to benefit from a VAT exemption for the intra­EU supply of goods, the identification number of the customer will become an additional condition.
  • Chain transactions: uniform criteria will be introduced to enhance legal certainty in determining the VAT treatment of chain transactions.
  • Proof of intra­EU supply: a common framework will be established for the documentary evi­dence required to claim a VAT exemption for intra­EU supplies.

These adjustments are due to apply from 1 January 2020.

Intra-Community supplies of goods to nontaxable persons. Persons who do not qualify as a “taxable person” will be a “Nontaxable person.” “Nontaxable persons” are broadly any persons or legal entities that are not registered for VAT and are not undertaking economic activities. In the EU, VAT is generally charged on supplies of goods made to nontaxable persons using the “origin principle,” which means that VAT applies in the Member State where the supplier of the goods is established. Consequently, the VAT rate charged is the rate that applies to the goods in the supplier’s Member State, not the rate that would apply in the customer’s Member State. For example, if a Danish tourist buys a dress in a shop in Paris, she pays VAT at the French standard rate of 20%, not at the Danish standard rate of 25%, even if the dress is subsequently “exported” to Denmark. However, exceptions to this rule apply for “distance sales of goods,” sales of “new means of transport” and sales to “nontaxable legal persons” (see below).

Acquisitions by exempt persons, nontaxable legal persons and flat-rate farmers. Exempt persons, nontaxable legal persons and farmers who account for VAT under a flat­rate scheme are not treated as taxable persons. Consequently, goods acquired by these persons are generally taxed according to the origin principle, that is, in the Member State of dispatch.

However, if a person in one of these categories makes intra­Community acquisitions in excess of EUR10,000 a year (or a higher threshold set by the Member State), it must register for and pay VAT on its acquisitions in the Member State of arrival in the same way as taxable persons, that is, by using the reverse­charge mechanism. However, because a nontaxable or exempt person does not generally deduct input tax, VAT due on intra­Community acquisitions must generally be paid to the VAT authorities. These persons may also choose to be treated as taxable persons even if their acquisitions do not exceed the turnover threshold.

New means of transport. All supplies of “new means of transport” are taxed using the destination principle, that is, in the Member State of arrival, regardless of the status of the vendor or acquirer. Consequently, any person that acquires a new means of transport (see below) from another Member State must account for VAT. Taxable persons account for VAT in the same way as for all other intra­Community acquisitions, that is, by using the reverse­charge provision. Nontaxable persons must pay VAT due to the VAT authorities.

The following are considered to be “means of transport”:

  • Boats with a length exceeding 7.5 meters
  • Aircraft with a take­off weight exceeding 1,550 kilograms
  • Motorized land vehicles with a capacity exceeding 48 cubic centimeters or with power exceeding 7.2 kilowatts that are intended to transport persons or goods

For boats and aircraft not to be treated as “new,” both of the following conditions must be met:

  • The supply of the goods must be more than three months after the date of their first entry into service.
  • They must have sailed more than 100 hours in the case of boats, and flown more than 40 hours in the case of aircraft.

For cars not to be treated as “new,” both of the following conditions must be met:

  • They must be supplied more than six months after the date of first entry into service.
  • They must have traveled more than 6,000 kilometers.

Excise products. The supply of excise products (i.e., energy products, alcohol and alcoholic beverages and manufactured tobacco) is always taxable in the Member State of destination. As a result, nonresident suppliers of excise products may be required to register for VAT there.

Intra-Community transportation of goods. VAT is charged on the intra­Community transport of goods using special rules. VAT is charged by the supplier on transport services provided to nontaxable persons in the Member State where the transportation begins.

For supplies of intra­Community transport services provided to taxable persons, the supplier does not charge VAT if the taxable customer is registered for VAT in a different Member State. Instead, the taxable person accounts for VAT in the Member State where it is established, using the reverse­charge mechanism.

Digital Single Market. On 5 December 2017, the ECOFIN Council adopted a series of measures aimed at improving the VAT environment for e­commerce businesses. These new rules build on the system already in place for e services (see Section C. Services in the Single Market, Electronic services) and will ensure that VAT is paid in the Member State of the final consumer.

From 1 January 2019, VAT rules for startups, micro­businesses and SMEs selling e­services to consumers online in other EU Member States will be simplified by allowing VAT on cross­border sales under EUR10,000 a year to be handled according to the rules of the home country of such businesses. SMEs will benefit from simpler procedures for cross­border sales of up to EUR100,000 annually.

From 2021 all companies that sell goods, and services not covered by the current “e­service” rules, to their nonbusiness customers in other Member States will be able to deal with their VAT obligations in the EU through one easy­to­use online portal in their own language (the “one­stop shop”). Currently, VAT registration is required in each EU Member State into which they want to sell. This system is already in place for sales of e­services. Large online marketplaces will be made responsible for ensuring VAT is collected on sales on their platforms that are made by companies in non­EU countries to EU consumers. This includes sales of goods that are already being stored by non­EU companies in warehouses (so­called “fulfillment centers”) within the EU. At the same time, the current exemption from VAT for imports of small consignments worth not more EUR22 from outside the EU will be abolished.

C. Services in the Single Market

Effective from 1 January 2010, under new rules on the place of supply of services, business­tobusiness (B2B) supplies of services are taxed where the customer is located, rather than where the supplier is located. For business­to­consumer (B2C) supplies of services, the place of taxation continues to be where the supplier is established. However, in certain circumstances, the general rules for supplies both to businesses and to consumers do not apply, and specific rules apply to reflect the principle of taxation at the place of consumption. These exceptions concern services such as restaurant and catering services, hiring of means of transport, admission to cultural, artistic, sporting, scientific and educational events, and telecommunications, broadcasting and electronic services supplied to consumers.

In general, the following rules apply to services rendered by a taxable person established in the

EU:

  • If the customer is established in the same Member State as the supplier, the supplier charges VAT on the service at the rate applicable in the supplier’s Member State. Member States may, however, apply the domestic reverse­charge mechanism referred to above in relation to supplies of certain services susceptible to fraud, namely gas and electricity services, telecom services and the supply of greenhouse gas emission allowances.
  • If the customer is a nontaxable person established in another Member State, the supplier charges VAT on the service at the rate applicable in the supplier’s Member State.
  • If the customer is a taxable person established in another Member State, the supplier does not charge VAT. The taxable customer accounts for VAT due using the reverse­charge provision at the rate applicable in the customer’s Member State.
  • If the customer is established outside the EU, the supplier does not charge VAT. The customer may be required to account for VAT in the country where it is established, depending on that country’s VAT law.

The following EU VAT rules apply if a non­EU person supplies services:

  • If the customer is a nontaxable person, the supplier does not charge EU VAT, unless they are “electronic services” (see Electronic services) or the “use and enjoyment” provision applies (see Use and enjoyment). However, the supplier may be required to charge VAT in its own country, depending on that country’s VAT law.
  • If the customer is a taxable person established in the EU, the supplier does not charge EU VAT. The taxable customer accounts for EU VAT due using the reverse­charge provision at the rate applicable in the customer’s Member State. The supplier may also be required to charge VAT in the non­EU country where it is established, depending on that country’s VAT law.
  • If the customer is established outside the EU, the supplier does not charge EU VAT, unless the “use and enjoyment” provision applies (see Use and enjoyment). However, the supplier may be required to charge VAT in its country, depending on that country’s VAT law.

Reverse-charge mechanism. In order to equalize treatment for the supply of services between Member States, the reverse­charge mechanism is used. Under the reverse­charge mechanism, the supply of services is zero­rated in the Member State of the supplier. The taxable recipient who has purchased the services self­assesses the VAT due as output tax. If the recipient is entitled to recover the VAT on the purchase as input tax, then the recipient may offset the input tax at the same time as declaring the output tax. Consequently, a recipient who deducts input tax in full does not actually pay any VAT in relation to reverse­charge supplies. This process also applies to services received from suppliers belonging outside the EU.

Use and enjoyment. The above rules may lead to nontaxation or to double taxation if either party is not established in the EU. To help avoid these effects, additional rules may apply that either allow a service that is “used and enjoyed” in the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed. Before 2010, Member States could apply the use and enjoyment rules to the following services:

  • The hiring out of a means of transport
  • Telecommunications services supplied by a taxable person established outside the EU to a nontaxable person established in the EU

With a few exceptions, effective from 1 January 2010, Member States may apply the use and enjoyment provisions to almost any type of service if they choose to do so.

If a service is taxed in the EU under the use and enjoyment provisions, a non­EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU.

Electronic services. VAT rules, which took effect on 1 July 2003, apply to supplies of “electronic services.” “Electronic services” include services such as supplies of downloaded software and music, pay­per­view television broadcasts, information services and distance­learning services supplied by computer.

Until 1 January 2015, the following VAT rules applied to electronic services:

  • EU taxable persons that supply electronic services charge VAT to taxable persons established in the same Member State and to nontaxable persons established anywhere in the EU, using the origin principle (that is, VAT applies at the rate in force in the Member State where the supplier is established).
  • EU taxable persons that supply electronic services do not charge VAT to taxable persons in other EU Member States or to customers outside the EU.
  • EU taxable persons that receive a supply of electronic services from another EU Member State or from outside the EU must account for VAT under the reverse­charge provision (that is, selfassess VAT).
  • Non­EU suppliers that provide electronic services to nontaxable persons are required to register for VAT in the EU and charge VAT based on the destination principle (that is, at the rate in effect in the customer’s Member State).

A non­EU service provider may decide whether to register for VAT in each Member State where it has nontaxable customers or it may use a simplification measure. The simplification measure allows a non­EU service provider to register for VAT in a single Member State to fulfill its administrative obligations throughout the EU (however, VAT remains chargeable to nontaxable customers at the rate in effect in each customer’s country). If the simplification measure is used, the non­EU service provider may only recover any input tax incurred through the EU 13th VAT Directive scheme (see Section E).

From 1 January 2015, new rules on the place of B2C supplies of electronic services were introduced. Effective from that date, these services are taxed in the country where the consumer is established. EU taxable persons that supply electronic services (as well as telecommunications and broadcasting services) have to charge VAT to nontaxable persons established anywhere in the EU, using the destination principle. EU suppliers are permitted to discharge their VAT obligations using the “Mini One­Stop Shop” (MOSS) scheme, which enables them to fulfill their VAT obligations (VAT registration, reporting and payment) in their home country, including for services provided in other Member States where they are not established. Accordingly, EU suppliers are able to apply a simplification measure similar to the one that is already in place for non­EU providers of electronic services (see above).

D. EU VAT rates

EU Member States may apply a standard rate of VAT and one or two reduced rates. No higher rates may apply. Until 31 December 2017, the standard rate must be at least 15%. Reduced rates may not be less than 5% and may apply only to certain goods and services listed in Annex III of the EU VAT Directive (Directive 2006/112/EC). As an exception to the reduced rate rule, Member States may continue to apply a reduced rate lower than 5% or to apply a reduced rate to goods not listed in Directive 2006/112/EC if such rates were in force in that country on 1 January 1991 or if the rate was agreed on at the time of the country’s accession to the EU. Special reduced rates may also apply in certain territories. On 6 November 2018, the ECOFIN Council adopted a proposal allowing Member States to apply reduced, super­reduced or zero VAT rates to electronic publications, thereby allowing alignment of VAT rules for electronic and physical publications.

Directive 2006/112/EC sets out which supplies of goods and services may or must be exempted when supplied within the territory of the Member State. Exempt supplies do not carry a right to deduct related VAT on purchases (known as input tax).

The European Commission periodically publishes the VAT rates that apply in the 28 Member States and provides examples of the goods and services that benefit from reduced rates in the EU. (see http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/ rates/vat_rates_en.pdf).

The European Commission on 28 January 2018 has proposed new rules to give Member States more flexibility to set VAT rates. In addition to the above rules, Member States would now be able to put in place:

  • Two separate reduced rates of between 5% and the standard rate chosen by the Member State
  • One exemption from VAT with credit (or “zero rate”)
  • One reduced rate set at between 0% and the reduced rates

The current, complex list of goods and services to which reduced rates can be applied would be abolished and replaced by a new list of products (such as weapons, alcoholic beverages, gambling and tobacco) to which the standard rate of 15% or above would always be applied. Member States will also have to ensure that the weighted average VAT rate is at least 12%. The new rules ensure that all goods currently enjoying rates different from the standard rate can continue to do so.

E. Recovery of VAT by non-established businesses

Every EU Member State must refund VAT incurred by businesses that are neither established nor registered for VAT in that Member State. A non­established business may claim VAT to the same extent as a VAT­registered business in the Member State.

For businesses established in the EU, refunds are made under the terms of Council Directive 2008/9/EC. All Member States must refund VAT to eligible claimants established in other Member States. Effective from 1 January 2010, the procedure for reimbursement of VAT incurred by EU businesses in Member States where they are not established is replaced by a new fully electronic procedure, thereby ensuring a quicker refund to claimants.

For businesses established outside the EU, refunds are made under the terms of the EU 13th VAT Directive. All Member States must refund VAT to claimants established outside the EU. However, Member States may apply a condition requiring the non­EU country where the claimant is established to provide reciprocal refunds with respect to its own turnover taxes.

Who is eligible. To be eligible for a refund under Council Directive 2008/9/EC, the claimant must satisfy the following conditions:

  • It must be a taxable person that is not established in the Member State of refund.
  • It must not have the seat of its economic activity, a fixed establishment from where business transactions are effected, a domicile or a residence in the Member State where the refund is requested.
  • It must not make supplies of goods or services in the Member State of refund, with the exception of transport and transport­related services and supplies of goods and services where the customer is the taxable person (reverse charge; see Section B).

To be eligible for a refund under the EU 13th VAT Directive, the claimant must satisfy the following conditions:

  • It must carry out activities that would make it eligible to be a taxable person in the EU if the activities were conducted there.
  • It must not have an establishment, center of economic activity, registered office or place of residence in the Member State where the refund is requested.
  • It must not make supplies of goods or services in the Member State where a refund is requested, with the exception of transport and transport­related services and supplies of goods and services where the customer is the taxable person (reverse charge; see Section B).
  • If a VAT refund is claimed in any Member State that requires reciprocal VAT refunds for its citizens, the country where the claimant is established must satisfy this condition.

Minimum claims. Under Council Directive 2008/9/EC, the minimum claim period is three months, and the maximum period is one year. The minimum claim for a period of less than a year is EUR400. For an annual claim, the minimum amount is EUR50. Member States may impose higher limits. The minimum claim limits for non­EU businesses may not be lower than for EU businesses. The claim limits applied by the individual countries of the EU are indicated in the respective chapters for such countries.

Documentation. Effective from 1 January 2010, under Council Directive 2008/9/EC, claimants established in the EU must electronically submit applicable documentation through an electronic portal set up by the Member State where they are established. The refund application must contain the following:

  • The applicant’s name, contact details, nature of the business and bank details
  • For each Member State separately, a list of the suppliers, nature of the purchases, purchase invoices, import documents and VAT amounts
  • On request by the Member State of refund, original invoices or import documents, if the taxable amount is EUR1,000 or more (EUR250 for fuel purchases)

Under the EU 13th VAT Directive, a non­EU claimant must submit the following applicable documentation to the relevant VAT office in the Member State where a refund is requested (the relevant offices are listed in the chapters dealing with the individual countries of the EU): • The standard application form, which is available in all official EU languages and in all Member States. However, the form must generally be completed in the language of the Member State where the refund is requested.

  • Proof of entitlement, which may include a certificate issued by the tax authorities in the country where the claimant is established (required annually).
  • Original invoices, import documents, bills, vouchers, receipts or customs clearance forms supporting the amounts of VAT claimed.
  • Documents appointing a tax representative in countries where that is required.

Time limits. Under the 13th VAT Directive, claims by non­EU businesses must generally be submitted within six months after the end of the calendar year, that is, by 30 June of the following year for most Member States. This deadline is generally strictly enforced. However, certain exceptions exist. The deadlines applied by the individual countries of the EU are indicated in the countries’ respective chapters.

Under Council Directive 2008/9/EC, the deadline for the electronic filing of the refund application is 30 September of the calendar year following the refund period.

Refunds are generally paid within six months after the Member State receives the claim. Some Member States pay interest on VAT amounts refunded outside this time limit (for further details, see the chapters dealing with the individual countries of the EU).

Appeals. All Member States provide an appeal procedure if a refund is denied.

F. EU filings

Intrastat. Intrastat is a system of reporting related to intra­Community transactions made by taxable persons. It was introduced on 1 January 1993 to allow the collection of statistical information on intra­Community trade in the absence of customs controls at the borders. EU businesses must submit information on a periodic basis to the VAT or statistics authorities if they make either intra­Community supplies or intra­Community acquisitions of goods in excess of certain limits. Penalties may apply to missing and late Intrastat reports and to errors in reporting. Further information on the requirements for Intrastat reporting is provided in the chapters dealing with the individual countries of the EU. Effective from 1 January 2010, a new measure requires businesses to file Intrastat returns for cross­border services provided to business customers in other EU Member States (for further details, see the chapters dealing with the individual countries of the EU).

EU Sales Lists. Taxable persons that make intra­Community supplies must submit EU Sales Lists (ESLs) to the VAT authorities quarterly. Penalties may apply to missing and late ESL reports and to errors in reporting. Further information on the requirements for ESL reporting is provided in the chapters dealing with the individual countries of the EU.

G. Invoicing

The cornerstone of the VAT system is the invoice, which must be issued for most taxable supplies. However, an invoice is not required for business­to­customer supplies of services.

The second EU Directive on VAT invoicing was adopted on 13 July 2010, and its provisions were required to be applied by Member States from 1 January 2013. The Directive 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 aims to promote the uptake of e­invoicing by allowing freedom of choice regarding the invoicing method used.

H. VAT returns

Please see the chapters for the individual Member States for details of the local VAT return requirements.

I. Vouchers

In June 2016, the EU Council adopted a Directive harmonizing the VAT treatment of vouchers in the EU. The Directive differentiates between single­purpose and multi­purpose vouchers. The former are defined as “a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher” while, all other vouchers are defined as multi­purpose vouchers. The transfer of a single­purpose voucher by a taxable person acting in his own name is regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a single­purpose voucher accepted as consideration by the supplier is not regarded as an independent transaction. The transfer of a multipurpose voucher, however, is not subject to VAT until it is accepted as consideration for the actual handing over of goods or the actual provision of services. These new provisions have entered into force on 31 December 2018.

J. Small businesses trading in the EU

The European Commission on 28 January 2018 has proposed new rules to give Member States more flexibility for small businesses trading in the EU. Currently, Member States can exempt sales of small companies from VAT provided they do not exceed a certain annual turnover, which varies between Member States. In addition, the simplification measures are only available nationally, meaning that businesses that trade cross­border cannot access the exemptions and simplification measures in another country.

While the current exemption thresholds would remain, the new rules would, if adopted, introduce:

  • EUR2 million revenue threshold across the EU, under which small businesses would benefit from simplification measures, whether or not they have already been exempted from VAT
  • The possibility for Member States to free all small businesses that qualify for a VAT exemption from obligations relating to identification, invoicing, accounting or returns
  • A turnover threshold of EUR100, 000, which would allow companies operating in more than one Member State to benefit from the exemption from VAT and simplification measures in all Member States

At the time of preparing this chapter, the legislative proposals are being discussed in the Council and will only become effective if and when the Council adopts them.