International VAT For Dummies PDF

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International VAT
Avalara Special Edition
by Steve Kaelble, Kid Misso,

Colin Matthews and
Matthew Harrison
These materials are © 2017 John Wiley & Sons, Inc. Any dissemination, distribution, or unauthorized use is strictly prohibited.
International VAT For Dummies®, Avalara Special Edition
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Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About This Book......................................................................... 1
Icons Used in This Book............................................................. 2
Where to Go From Here............................................................. 2
Chapter 1: Getting to Know VAT. . . . . . . . . . . . . . . . . . . . . 3

What is VAT?............................................................................... 3
The invention of VAT....................................................... 4
Where to find VAT............................................................ 5
How VAT Works.......................................................................... 5
How VAT is calculated..................................................... 6
Companies collect VAT, and also pay it........................ 7
Different countries, different approaches..................... 7
Chapter 2: Types of Taxable Transactions. . . . . . . . . . . . 9

Taxing the Supply of Goods....................................................... 9
Selling Goods Intra-community............................................... 12
Importing Goods and Paying VAT.......................................... 14
Services Can Be Taxed, Too.................................................... 14
Chapter 3: Five Considerations for Applying VAT. . . . . 15

Who are the Companies or People Involved?....................... 15
What is the taxable status of each party?................... 15
Are they established or non-established entities?..... 17
Where is each party VAT registered?.......................... 17
What’s Supplied Means a Lot.................................................. 17
What’s the Place of Supply?.................................................... 18
VAT on goods.................................................................. 18
VAT on services.............................................................. 20
Can an Exemption be Applied?............................................... 21
Who is Liable?........................................................................... 22
The seller......................................................................... 22
The customer.................................................................. 22
Chapter 4: Understanding Registration

Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Knowing When It’s Time to Register...................................... 23
Types of VAT Registration....................................................... 25
Permanent establishment.............................................. 25
Fixed establishment....................................................... 25
iv International VAT For Dummies, Avalara Special Edition
Direct................................................................................ 25
Fiscal representation...................................................... 25
Mini-One-Stop-Shop (MOSS).......................................... 26
Distance Selling and the Different Types of Thresholds...... 26
Do You Need Fiscal Representation?..................................... 28
How to Register......................................................................... 28
Registration options: Portal or paper?........................ 29
Document requirements................................................ 29
Chapter 5: Filing and Compliance . . . . . . . . . . . . . . . . . . 31

Understanding the Basic VAT Filing Process........................ 31
The Country Sets the Rules..................................................... 32
When to File............................................................................... 33
What to File................................................................................ 34
VAT returns..................................................................... 34
Intrastat............................................................................ 34
EC Listings (recapitulative statements)...................... 35
Control statements......................................................... 35
Reverse charge sales listings........................................ 36
How to File................................................................................. 36
Making Payments...................................................................... 36
VAT Invoicing............................................................................ 37
Non-compliance and Penalties................................................ 38
Chapter 6: Ten (or so) Helpful VAT Resources. . . . . . . . 39

Using VAT Reporting Software................................................ 39
Determining the Right VAT Treatment.................................. 40
Calculating Final Transaction Costs....................................... 41
Getting into Cloud-based Sales and Use Tax Compliance..... 41
Getting Assistance with Registration..................................... 42
Finding Help for Managing Returns........................................ 42
Connecting with Other Taxation Expertise........................... 43
Seeking Information Online..................................................... 43
Learning About Related Topics............................................... 43
Introduction
Y ou can’t do business across the European Union and
much of the world without dealing with Value‐Added
Tax, or VAT. It’s a legal requirement in the majority of places
your organisation wants to be. And like pretty much every tax,
it can be a pain to deal with.
The fact is, business systems typically don’t manage the

idiosyncrasies of international VAT very well. That leaves
businesses to follow very labour‐intensive manual processes.
Complicating things further, the mandates in the EU and in
individual countries change frequently, and you’ve no choice
but to keep up with that evolving picture.
That requires a lot of effort from people in your company –

smart people whose talents really ought to be devoted to
helping the company grow, become more profitable and
efficient, and avoid the inevitable business risks that go well
beyond taxation. Your best minds can become distracted
from your core business, if they must chase the complexities
of VAT compliance that get more daunting the further from
home your business takes you.
You’re going to be dealing with a VAT burden, whether you’re

selling goods or services, shipping things overseas to customers
or warehouses, transacting business over the Internet, whatever
it is you do. The good news is, your VAT pains can be eased.
About This Book

International VAT For Dummies, Avalara Special Edition is your
introduction to the vast and complicated world of international
VAT. It certainly doesn’t have all the answers – that would take
many, many more pages than available here. What’s more,
laws and regulations are always on the move. In any case, by
the time you finish Chapter 6, you’ll realise that you don’t need
to know absolutely everything – you just need to connect with
someone, or some automated solution, that does.
2 International VAT For Dummies, Avalara Special Edition
With that in mind, this book walks you through the definition
of international VAT and spells out how the concept works. It
discusses how VAT is regulated and by whom. It outlines the
various types of taxable transactions, discusses how you go
about registering for VAT, and shares how you generate and
file the required VAT returns. It offers some of the consider-
ations you need to ponder to figure out just how VAT applies
to a particular transaction. And most important, it gives you
suggestions on where to turn for help.
Icons Used in This Book

If you look in the margins on the pages of this book, you’ll
notice some nifty icons. Beyond nifty, they’re useful, placed
strategically to let you know there’s an important point
nearby.
We’d like to think every word in this book matters, but some
words matter more than others. Near this icon are some of
those words.
Check out the adjacent paragraph for some helpful advice on

easing your company’s VAT experience.
This is a subject brimming with complications and techni-

calities. Like those techie, detailed things? Then read this
paragraph.
Any discussion of taxes is going to be filled with potential

trouble. Here’s advice on how to steer clear of the pitfalls.
Where to Go From Here

This book is intended to meet your needs, whatever those
needs might be. Flip through the pages and find what you’re
looking for – there’s not a plot, so you won’t hit any spoilers
if you start with Chapter 4, and you won’t miss the point by
omitting a particular section. Or, flip from one page to the
next, as if this were gripping fiction. However you choose to
read, please read on and enjoy!
Chapter 1
Getting to Know VAT
In This Chapter
▶▶Defining Value-Added Tax
▶▶Understanding how VAT works
▶▶Learning how the EU regulates VAT
T here’s no escaping it. You need to get to know VAT,

whether you want to or not. It’s part of the price of doing
business in many parts of the world, and quite a few other
places, too.
This chapter explores the basics of VAT, including what it

is and a bit of history regarding where it came from. It also
explores in very general terms how VAT works, and how it’s
governed.
What is VAT?
Value‐Added Tax begins as a pretty simple concept. Consider
what happens when a product or service moves all the way
from nothingness to delivery to the final customer. The idea is
to tax whatever value is added at each step along the way.
VAT is an indirect or transaction tax that is levied on the

sale of goods and services (see Chapter 2 for types of taxable
transactions).
If you’re talking about an article of clothing, for example, it

may begin as a cotton plant, first planted in the ground, then
harvested, then shipped to a factory where it becomes cloth,
shipped again to another factory where it’s cut and sewed
into a shirt, shipped again to a warehouse, then to a retailer.
When you think about that supply chain, overly simplified in

that example, you can start to see that the ‘simple’ concept
of VAT is anything but simple. Now consider the fact that the
various steps along the path are often in different countries,
with different sets of laws and tax structures. It definitely gets
complicated.
Complex, yes, but also a highly efficient mechanism, espe-

cially from the perspective of the governments that levy the
taxes. That’s due in part to the fact that the concept of VAT
puts the onus on companies to collect and remit the taxes, on
behalf of the taxing authorities, rather than those authorities
trying to collect VAT directly from every man, woman, and
child in every country.
VAT is levied throughout the supply chain and calculated

by multiple parties, but, ultimately, it’s a tax on the end con-
sumer and will be included in the total price paid.
The invention of VAT

VAT is a very widespread form of tax, now in use in about
70 per cent of all countries, but it hasn’t always been that way.
Some believe the idea was tossed about in Germany in the

1800s as a theoretical concept, but it didn’t really come to
life until 1954, when the tax authority in France adopted a
VAT regime. Lord Barber brought the idea to the UK in 1973,
where VAT got its start as a 10 per cent tax on most goods
purchased from a business.
As the idea has evolved, the implementation and rate struc-

ture have varied considerably, within countries and between
them. Over the past couple of decades, the emphasis on tax
collection has shifted from direct tax to VAT. This is because
it’s a far more efficient method of tax collection and it doesn’t
discourage businesses from setting up in that country. As a
result, average VAT rates have risen from around 17 per cent
to 21 per cent.
Meanwhile, the growth in global commerce along with

Internet sales have made VAT compliance all the more
complex.
Chapter 1: Getting to Know VAT 5
In the current landscape, organisations can easily waste
hundreds of hours and untold riches managing the burden of
VAT. They can also face fines and penalties if they don’t get it
right. There are frequent changes in rates, requirements, and
regulations. As a business ventures into different countries,
the complexities can become especially burdensome. It takes
an efficient, automated tax compliance process to navigate
the tricky world of VAT.
Where to find VAT

If you’re the sort of person to make lists, you might spend
less time making a list of where VAT is not in effect. Of the just
under 200 countries in the world, about 140 of them use VAT
in one form or another.
One could almost say countries with VAT range from A to Z.

Not quite. There are plenty of As, beginning with Albania,
though there aren’t any VAT jurisdictions beginning with X,
Y, or Z (unless you count New Zealand). Suffice it to say that
you’ll run into VAT in most parts of the world, and there’s a
good chance it’ll begin for you right at home.
How VAT Works

Most of those picking up this book are likely to be in Europe,
so a lot of the explanations and examples will be European.
VAT in Europe is governed by Directive 2006/112/EC (the EU

VAT Directive). Yet, because nothing is as simple as it sounds,
it’s important to add that VAT in the EU is legislated at the
Member State level.
Here’s the basic concept of how VAT works:
✓✓There are a number of things that determine whether a

company should register for VAT in a country. These can
include:
••Annual level of sales turnover
••Annual level of acquisitions of goods from other
EU Member States
••Whether stock is held in that country

••The types of supplies that are made
✓✓Your organisation may need to register for VAT in one
country but not another (at least not yet).
✓✓When VAT applies to your organisation, you may need to
charge VAT on the things that you sell. See Chapter 3 for
more information.
✓✓However, you may also be able to reclaim the VAT on the
things that you buy.
✓✓You will need to issue compliant VAT invoices on your
sales.
✓✓You must sort all of this out on VAT returns, and submit
them at the appropriate times to the appropriate taxing
authorities. You can find more on filing in Chapter 5.
How VAT is calculated

So, you’ve determined that VAT has to be considered on the
things your organisation buys and sells. Let’s look at some of
the terminology used:
✓✓Input VAT: As the name suggests, this is the VAT that

covers those things that ‘go into’ a company. In other
words, purchases.
✓✓Output VAT: Similarly, this is the VAT that’s accounted
for on those things that ‘go out’ of a company. Think in
terms of sales.
VAT is calculated as a percentage of the supply. The percent-

ages charged can vary depending on the country and type of
good or service being supplied.
For example, standard VAT rates might be 7 per cent in

Singapore but 27 per cent in Hungary. Average the VAT rates
across the European Union Member States and you’ll find it’s
about 21 per cent.
The EU specifies a minimum of 15 per cent as a standard rate.

For certain items, though, the EU permits a reduced rate as
low as 5 per cent. For some, a zero rate is permissible. And
certain types of transactions, such as financial transactions,
may be exempt from VAT.
Chapter 1: Getting to Know VAT 7
Companies collect VAT,
and also pay it
You probably already knew it before even picking up this book,
but it should be extra‐obvious that dealing with VAT is a compli-
cated endeavour. You have to pay VAT when the law requires,
and you also have to collect it. That’s a lot of work for you.
It’s also a lot of work for your business systems, many of which
might not be fully up to the task. When you think about it, prac-
tically every system in your office has some sort of VAT needs.
Here are some examples of typical systems that often must

deal with VAT in one way or another:
✓✓Sales, purchasing, and accounting systems, including

enterprise resource planning (ERP)
✓✓E‐commerce systems, including those enabling web sales
✓✓Retail point‐of‐sale systems
✓✓Commodities‐trading systems
Different countries, different

approaches
VAT is not exactly simple even if your business never takes
you across a border, either on the supply side or reaching the
customer. When the lifecycle of your product or service takes
place in multiple countries, your VAT life gets all the more
complicated.
There are, however, some ground rules that bring a bit of

order to the chaos. Consider, for example, how VAT works
within the European Union.
The European common system of VAT on goods and services

follows rules that are contained within the EU VAT Directive.
All of the EU Member States are required to incorporate

the VAT Directive into their local VAT laws. VAT should be
applied to all taxable persons, corporate bodies, and individu-
als that deal with regular supplies (governments and public
offices are generally exempt).
The VAT Directive establishes a framework for determining

VAT within the EU. Its guidance helps companies and taxing
authorities to understand the types of transactions that are
taxable, to whom the tax is applicable, where it’s due, and
which party is responsible for paying it and when.
There are all sorts of optional elements and opportunities for

individual countries to apply certain rules differently in their
local legislation, which results in slightly different applica-
tions of VAT from country to country. Of course, countries
outside the EU, whilst typically applying the same principles,
are free to apply VAT according to their needs.
Here are some of the significant areas covered by the VAT

Directive:
✓✓Place of supply: One of the most difficult things to

determine in a VAT calculation is in which country the
transaction is taxable, and therefore the rate that should
be applied. Rules for place of supply vary, particularly
when considering supplies to businesses versus private
individuals.
✓✓Obligations to pay: In the majority of cases, it’s the
responsibility of the supplier to collect VAT on its sale
from the customer and pay the VAT amount to the tax
office. However, on occasion, the liability is passed to
the customer to pay the VAT to the tax office under the
reverse charge mechanism.
✓✓Invoicing: It’s imperative that invoices are raised cor-
rectly as the invoice is the document that allows for
deduction of input VAT. If the invoice is wrong, a tax
authority can refuse repayment of the amount of VAT
paid on the associated purchase.
✓✓Tax point: Known as ‘chargeability’, you must under-
stand when VAT on a transaction becomes chargeable
and due to the tax authority. This could be the date that
the supply of goods or services was completed (general
rule) but could also be the invoice date or the date a pay-
ment on account was made.
Chapter 2
Types of Taxable
Transactions
In This Chapter
▶▶Taxing the supply of goods
▶▶Selling goods within the EU
▶▶Crossing the border to serve customers
▶▶Understanding how VAT affects services
T here are four taxable transactions in EU VAT: the supply of

goods, the supply of services, the importation of goods,
and the intra-community acquisition of goods.
This chapter explores some of those transactions and the

ways in which VAT applies. It outlines how VAT impacts the
supply chain across the manufacture of an item, explores
VAT transactions within the EU, discusses how the process of
importing can muddy the picture, and talks about VAT impli-
cations in relation to services.
Taxing the Supply of Goods

The VAT process has its pluses and minuses. Quite literally.
At every step of the path a product takes – from raw materi-
als, to basic components made from those materials, to the
final assembled product, to the final sale at a retail shop –
output and input VAT is declared. How much is remitted to
the government at each step is essentially the output VAT
minus the input VAT.
Here’s how it would work for a relatively simple example, the

manufacture and ultimate sale of a wooden chair in Sweden.
In this simple example, there are four stages (see Figure 2‐1
for a graphic illustration of this):
✓✓The logs: Trees are cut and sold to a timber mill. This is
the beginning of the chain, so there’s no input VAT. After
all, the trees are in the ground at the beginning of this
chain. Once the trees are cut down and sold to the mill
as logs, output VAT is applied on their sale. Let’s say the
output VAT on this shipment of logs is 25 kronor. There’s
no input VAT, so the VAT that gets remitted at this point
is 25 ‐ 0 = 25 kronor.
✓✓Logs turn into planks: The timber mill turns those logs
into wooden planks, which it sells to the chair manufac-
turer. Remember that 25 kronor in output VAT from the
last step? That is now accounted for as 25 kronor of input
VAT at this stage. The output VAT from the timber mill
is calculated on the sale of the planks. For this example,
we’ll say that the output VAT is 50 kronor. So how much
gets remitted here? Output minus input, or 50 ‐ 25 = 25
kronor.
✓✓Making the chair: The manufacturer has acquired planks
to make chairs, and that acquisition tallied 50 kronor in
output VAT from the mill. The chair manufacturer counts
that as 50 kronor of input VAT. When it forms those
planks into a chair, the manufacturer has added value. It
then sells the chairs to a retail shop, and the output VAT
calculated on that sale is 100 kronor. The amount remit-
ted at this stage is, again, output VAT minus input VAT.
100 ‐ 50 = 50 kronor.
✓✓Chairs for the people: Finally, the retailer sells those
wooden chairs to a bunch of people who need a place
to sit. The retailer has added a bit of a different kind of
value here, by presenting a variety of furniture in a local,
convenient store. These chairs sell for a higher price
than the retailer paid to acquire them, so there’s output
VAT here. The output VAT on the sale of chairs to the
public totals 200 kronor. But as with the other stages,
the VAT remitted is this output VAT minus the input
VAT. Remember that the output VAT from the previous
stage was 100 kronor, and that now becomes the input
VAT for this stage. So the amount remitted is 200 ‐ 100 =
100 kronor.
Chapter 2: Types of Taxable Transactions 11
Figure 2-1: How VAT applies to the manufacture of a wooden chair in Sweden.
✓✓The grand total: This simple example of a value chain

had four steps. In the first step, VAT of 25 kronor was
remitted, and the same amount was remitted at the
second stage. The third stage had 50 kronor of VAT
remitted, and the final stage featured a remittance of
100 kronor. So the total VAT – representing all of the
value added when those trees became logs that become
planks that became chairs that became nice places to
sit – is 25 + 25 + 50 + 100 = 200 kronor.
This example spells out the general principle of calculating

and remitting VAT. The reality, of course, is a whole lot more
complicated. Your process may involve multiple systems that
need to estimate VAT and share that information with the
customer.
For example, the sales process might begin with a customer

enquiry. The customer wants to know what the cost will be,
and the initial quote generated will include an estimate of the
VAT. The customer then decides to place an order, and the
sales order generated also includes a VAT estimate.
The order is shipped, then the customer gets the invoice

and pays the bill. This is the point when VAT moves from
being an estimate to being legal and due. Note that in some
countries, VAT is considered due at the invoice stage, while in
others, payment triggers VAT (this is known as cash account-
ing). VAT also immediately becomes due in most countries if
payment is received before invoicing.
Selling Goods Intra‐community

It’s one thing if the journey that your product follows stays
within country borders. But there are even more VAT consid-
erations when your customer is a private individual (B2C) and
is on the other side of a border, even if it’s still within the EU.
If you’re in the EU and your customer is a private individual

in another EU country, a sale of goods is considered a
distance sale.
Chapter 2: Types of Taxable Transactions 13
You’re registered for VAT in your home country, but you
must also keep track of your distance sales. This is because
once they exceed a certain amount, known as a distance sell-
ing threshold, you’ll need to register for and charge VAT in the
country to which the goods are shipped, and stop charging
VAT in the country from which the goods are shipped.
For example, let’s say you’re in the EU and a growing quan-

tity of your distance sales are heading across the border to
Germany. If those sales total less than the German threshold
of €100,000 per calendar year, you charge VAT in the country
that the goods were shipped from. For any sales beyond that
threshold, though, you’ll have to charge VAT in Germany.
The B2B situation for intra‐EU sales is a bit different. For

intra‐community supplies (sometimes called intra‐community
dispatches or EC supplies), you won’t have to charge any
VAT when selling or moving goods from one EU country
to another, as they’re exempt. There are some important
criteria, though, or else you might be liable for any VAT that
goes missing:
✓✓Both parties must have a valid VAT number. You must

check your international customer’s VAT number with the
EU VAT Information Exchange System (VIES), and note
your customer’s VAT number on your sales invoice. This
can be done on Avalara’s VATlive website (see Chapter 6).
✓✓The goods must move from one Member State to another
and you must have documentary proof of the movement
of the goods.
Say, for example, you’re operating in France and your cus-

tomer is across the border in another EU country, such as
Germany. You must exempt the supply. The buyer pays
VAT on the arrival of those goods into Germany in the form
of acquisition VAT. Local VAT is charged, but it’s then imme-
diately recovered, so the effective VAT is zero. This is an
intra‐community acquisition.
Importing Goods and Paying VAT

The story gets even more complicated when you add the
notion of importing goods into the EU from a country outside
the EU. The rules vary quite a bit, depending on two main
factors, such as:
✓✓What type of goods you’re dealing with

✓✓What countries are involved in the transaction
It’s best to begin with some general understandings. With

regard to VAT and customs, bringing goods into the EU from a
non‐EU country is considered an import. The country in which
the goods arrive will charge the rate applicable to the goods
on that import transaction – for example, import VAT on a
laptop arriving in Germany might be charged at 19 per cent.
Unless you’re using an import VAT deferment scheme, the

goods won’t be released from customs until the import VAT
is paid. Once this happens, the goods are considered to be in
free circulation, and may move to another EU country for stor-
age or sale without incurring import VAT again.
Outside the EU and the GCC there is currently no notion of

an intra‐community supply between other countries, and all
cross‐border supplies are treated as imports and exports.
Services Can Be Taxed, Too

As if taxing goods wasn’t hard enough, VAT is also applicable
to services. There are several different types of service that
are taxable and a wide range of different treatments that apply.
Some examples of the various services that are subject to VAT

include consulting services, digital services, event admission,
transportation services, and services related to immovable
property. You can find more information on how these are
taxed in Chapter 3.
Chapter 3
Five Considerations for
Applying VAT
In This Chapter
▶▶Determining details of the companies or people involved
▶▶Spelling out what you’re selling and figuring out the place of supply
▶▶Applying exemptions and deciding who is liable
I s VAT due, how much, and who pays it? This chapter out-
lines the five steps that will determine the VAT.
Who are the Companies

or People Involved?
This would seem like a relatively simple question to answer.
Someone is supplying goods or services, and someone else
is buying them. There may be more than two parties, though,
and it’s important to consider the details of each, including
their taxable status, where they are established, and where
they are VAT registered.
What is the taxable status

of each party?
There are many possible choices here, and again, the answer
to the question will have a major bearing on VAT.
Taxable person
A taxable person is usually a business that carries out eco-
nomic activity. If you’re an employee, you’re not a taxable
person, but your business is. We’ll refer to a taxable person as
a business for the remainder of the guide.
Governmental bodies are not considered taxable persons

unless they happen to be engaging in certain activities that
are often handled in the private sector, such as utility services
or transportation.
With right to deduct

As an item makes its way through the production and supply
chain, a key to assessing VAT is the ability to deduct input
VAT on goods or services that are purchased. A taxable
person can deduct input VAT that’s paid or due in a variety of
situations.
Without right to deduct

A taxable person who only supplies goods and services that
are exempt from VAT does not have the right to deduct input
VAT on purchases.
Mixed taxpayer
As the title suggests, this is a taxable person that makes both
exempt and taxable supplies. The mixed taxpayer can only
reclaim VAT relatable to taxable supplies.
Non‐taxable person
This book has already made it clear that VAT is confusing.
Here’s one of the most confusing parts yet: a non‐taxable
person is actually the only person who really pays the tax!
Chapter 1 discussed how VAT is designed to be a tax on the

end consumer, but it’s typically a non‐taxable person who is
the end consumer, or in other words, a private individual. The
remainder of the guide will refer to a non‐taxable person as a
private individual.
The non‐taxable person status relates to the fact that this

person is not carrying out economic activity, is not VAT regis-
tered, doesn’t file a VAT return, and doesn’t remit any VAT to
a tax authority.
Chapter 3: Five Considerations for Applying VAT 17
Non‐taxable legal person
VAT regulations suggest that this kind of entity is in a lot of
ways similar to a taxable person, with a fixed establishment.
But, this person or business is not taxable.
A non‐taxable legal person is an organisation that is not

responsible for paying, collecting, or remitting VAT. Examples
are usually altruistic organisations such as governments or
The European Commission.
Are they established or

non‐established entities?
Where is your company’s headquarters or main base of opera-
tions? The chances are that you are an established entity in
that location. It’s where you physically are, where you oper-
ate, where you’re incorporated or where you have a sufficient
degree of human or technical permanence, and so on. A non‐
established entity is the opposite.
Where is each party VAT

registered?
An organisation may be VAT registered in its home country,
or in many other places, too. It all depends on its business
activity. A party’s VAT registrations are important in making
the right VAT determination.
What’s Supplied Means a Lot

Some goods and services aren’t subject to VAT, some face one
rate, some face another, and it all varies by country.
Some goods and services that are considered to be vital or

of cultural or educational significance may have a reduced or
zero VAT rating according to a country’s legislation. This is
often a political subject and changes from country to country.
Consider ‘The Tampon Tax’ or ‘The Pasty Tax’ in the UK.
In addition, depending on the type of supply, you’ll need to

consider differing factors to properly assess the VAT. For
example, a goods transaction is dependent on shipping and
address information, whereas the download of a game is
dependent on the physical address of the customer.
What’s the Place of Supply?

The place of supply refers to the country where the transac-
tion is taxable. To understand which country’s VAT rules
apply to a transaction, you need to figure out the place of
supply for the type of good or service transaction.
VAT on goods
Selling goods domestically
This is straightforward and the same for selling to a business
and a private individual. The place of supply is where the
goods are located at the time of the supply. All you will need
to do is identify the VAT rate that is applicable to the product
being sold.
Selling goods cross‐border to private individuals

The place of supply is where the goods are shipped from
if the volume of your sales in a calendar year is below the
distance‐selling threshold of the country where the goods are
being shipped to. Once the volume of your sales exceeds the
distance‐selling threshold in a calendar year, then the place of
supply will be where the goods are shipped to.
Selling goods cross‐border business‐to‐business

Intra‐community supplies
An intra‐community supply is the sale of a good from a busi-
ness in one Member State to a business in another Member
State. The place of supply for an intra-community supply is
the Member State in which the transport of the goods starts.
The corresponding purchase is known as an intra-community
acquisition, for which the place of supply is the Member State
in which the transport ends.
Imports
When goods are imported, the place of supply is the coun-
try into which they’re imported. There are some exceptions,
such as VAT warehouses that involve special arrangements
that defer the importation, or, in the case of the EU, keep
those goods from being in free circulation for the time
being.
Exports
When shipping goods out of the EU, the place of supply is the
country from which the goods are shipped.
Chain transactions
It’s common for business‐to‐business supply chains to have
multiple steps in the chain. Chain transactions have some
special considerations for VAT that are beyond the scope of
this guide. However, one consideration worth mentioning is
that only one party in a chain can perform an exempt intra‐
community supply. This will impact how the parties will need
to structure their chains and where they will need to be VAT
registered.
Triangulation simplification
One very common form of chain is called triangulation. This
happens when three companies in three different EU coun-
tries are involved in a supply of goods. For example, a UK
company makes a sale to a German customer, but it buys the
goods from a French supplier that then ships directly to the
German customer. See the example in Figure 3‐1.
The UK seller is a middleman in this transaction, and assum-

ing it is not also established in Germany, the middleman can
apply an exemption with the customer in Germany paying the
VAT under the reverse charge mechanism. This is known as
triangulation simplification.
Figure 3-1: A triangular transaction.
VAT on services
Providing services to customers located in the same
Member State
Like selling goods domestically, this is straightforward and the
same for selling to a business and a private individual. The place
of supply is where the customer is established when supplied
to a business and where you are established when supplied to a
private individual. Of course, on a domestic supply these will be
the same countries.
Providing services to customers located in other

Member States
Generally, if your organisation is providing services to a busi-
ness, then the place of supply is considered to be that busi-
ness’s place of establishment.
If, on the other hand, you’re supplying services to a private

individual, the place of supply is wherever you’ve established
your business.
Services related to immovable property

Now consider a service you’re providing that is related to a
building or land. For example, a night in a hotel room, or an
architect providing onsite supervision at a construction site.
Here, the place of supply is wherever that property is located.
Transport of persons
Transporting people is a service. So where is that service sup-
plied? In the EU, it’s wherever the transportation takes place.
In cases where the transport crosses more than one country, the
VAT should be allocated in proportion to the distances covered.
Transport of goods
Transport of goods to private individuals is treated a lot like
transport of people. But if the transport is cross‐border, the
place of departure is the place of supply.
Admittance to events
For both businesses and individuals, the place of supply for
admittance to events such as sporting, cultural and artistic
events is where the event is performed. This is also the case
for other event services, such as the organisation of a wed-
ding, when supplied to private individuals.
Catering services
Making and serving food and drink is a service. The rules are
quite straightforward and the place of supply is simply where
the service is provided.
Use and enjoyment

In the EU, Member States may apply use and enjoyment rules
to change the place of supply for some services to be taxable
within the EU if the customer or even the performance of the
service are outside the EU. The purpose of these rules is to
avoid either double taxation or no tax being applied. These
rules are complicated and outside the scope of this guide.
Can an Exemption be Applied?

When you’re determining how to apply VAT, it’s vital to learn
whether an exemption can be applied.
Specific goods and services may be exempt from VAT, usually

when they’re deemed to be in the public interest. Postal ser-
vices and medical care are big ones, as are education and cer-
tain things related to cultural or religious operations. Various
activities involving financial services and insurance are often
exempt, and even gambling.
There are also certain supply types that are exempt such
as intra‐community supplies, supplies in VAT warehouses,
exportation and international transportation.
Who is Liable?
This is the big, final question, and it’s an important one
because it determines who actually owes the VAT.
The seller
Generally the seller is responsible for collecting the VAT and
remitting it to the tax authority.
The customer
In some business‐to‐business situations, it’s considered too
risky to have the seller collect the VAT, so the liability for pay-
ment of VAT to the tax authority is shifted to the customer.
The transaction is accounted for by the customer in the form

of a self‐assessment. This is called reverse charge, and is the
payment of VAT by the customer to the tax authority. The
customer also has the ability to immediately recover the VAT
within the same transaction.
There are three main situations in which this happens:
✓✓The main situation is for general services, which are taxed

where the customer is established. When a cross‐border
supply takes place, it will often be taxable in a country
where the seller is not established. It’s considered too
risky for these sellers to collect and remit the VAT, and so
the customer will reverse charge the VAT.
✓✓The second situation covers domestic supplies in which the
seller is not established in the country where the supply
takes place. This is known as domestic reverse charge.
✓✓The third is based on supplies of specific goods and ser-
vices that are often involved in fraud. An example is the
bulk supply of mobile phones or tablets that have a high
value and are easy to transport. This is also known as a
domestic reverse charge.
Chapter 4
Understanding Registration
Requirements
In This Chapter
▶▶Knowing when to register
▶▶Understanding what type of registration to apply for
▶▶Making registration happen
A
‘
re we there yet?’ Any parent knows that expectant
question, asked by an impatient child on a trip to a
great destination. Businesses ask that question all the time,
too, with regard to VAT registration – though it’s safe to
say that they’re not quite as eager to get to this particular
destination.
This chapter explores the important steps in the VAT regis-

tration process. The first step is to understand whether you
need to register for VAT in a given country, and the answer
is dependent on your business activity. Once you know you
need to register, you must determine what kind of registra-
tion to apply for and then you must apply for it. This chapter
explains how to do all of this.
Knowing When It’s

Time to Register
If you’re lucky, it’s only a matter of time before your organisa-
tion has grown enough to register for VAT. It’s important to
know the requirements.
First of all, what does it mean to register? It means getting

your VAT number. Businesses providing taxable supplies that
have exceeded the resident VAT registration threshold are
required to register and get that valid, unique VAT number.
You’ll typically register in your home country, but you may
also be required to register in other countries where you’re
buying and selling.
Now for the more complicated details. There’s always talk

about simplifying the European VAT system, but the truth
is, it’s still up to each country to set and interpret and apply
the rules. VAT registration requirements vary from country
to country, including when registration is needed, the docu-
ments filed with the application, how the registration is sub-
mitted, and the type of registration.
Here are some examples of circumstances when a trader may

be required to register for VAT in a foreign country:
✓✓Distance‐selling goods to consumers over the Internet

or via catalogue above a country’s distance‐selling
threshold
✓✓Selling goods to consumers through an online market-
place that takes care of warehousing and fulfilment in a
country outside of where you are established
✓✓Supplying digital services to private individuals
✓✓Importing goods to a country for onward sale to
businesses and private individuals
✓✓Holding goods in another country where you sell to
businesses locally
✓✓Holding a live conference, exhibition, or training abroad
if attendees pay an admittance fee
✓✓Supplying and installing equipment in a foreign country
✓✓Supplying services related to immovable property
✓✓Providing transport services in a foreign country
When must non‐resident companies register for VAT? Usually,

right away. The requirements vary wildly and you may need
help to work out whether you have to register. Fortunately,
the experts at Avalara are here to help.
Chapter 4: Understanding Registration Requirements 25
Types of VAT Registration

It probably won’t come as a surprise to you, but the issue
of what type of VAT registration you need isn’t entirely
straightforward. This is because there’s more than one
type of registration available to businesses.
Permanent establishment
When operating in the country in which a business is legally
incorporated, total taxable sales need to be tracked over a
specified period to see whether the business is required to
register and charge VAT. This may be over a rolling 12‐month
period or per calendar year. This is known as the resident
VAT registration threshold.
Fixed establishment
If a business has a branch, an office, or a sufficient degree of
human or technical permanence in a country, it may need to
register that fixed establishment for VAT.
Direct
Up until 2003, all companies that traded across the EU were
required to appoint a local fiscal representative in each
country in which they were providing a taxable supply.
As one would imagine, that arrangement was not terribly
friendly to cross‐border business. This changed to allow
businesses to VAT register directly with the tax authority as a
non‐established business, making compliance simpler.
Fiscal representation
Some countries do not allow direct VAT registration for
non‐established businesses and require the appointment of
a local fiscal representative as part of the VAT registration.
In the case of the EU, fiscal representation is required in the
majority of countries when the business is established
outside of the EU.
Mini‐One‐Stop‐Shop (MOSS)
If you’re in the mood for simplification, you’ll appreciate this
concept that has to do with the taxation of cross‐border B2C
digital services, such as telecommunications and downloads
of music, movies, and books.
Here’s the issue: under 2015 changes to the EU VAT rules,

these kinds of services are taxed at the place of the private
individual. If you’re an online seller, you may have VAT liabili-
ties throughout the EU.
MOSS is a mechanism for allowing sellers to file a single VAT

return in their own country covering all of what they have
sold elsewhere. If you file a MOSS return, you don’t have to
register in those foreign countries. That’s a tremendous relief!
Distance Selling and the

Different Types of Thresholds
Few trends have shaken up the world of commerce more
than distance selling. Sales to private individuals via the
Internet are exploding all over the world. In the EU, for example,
e‐commerce is expected to account for more than one‐fifth of
all retail sales within the next few years.
When working out whether you need to VAT register in a par-

ticular country, you need to understand which registration
threshold is applicable. When selling domestically, you’ll need
to compare your turnover to the resident registration threshold,
which may be set over a rolling 12 months or by a calendar
year. When selling cross‐border to private individuals, you’ll
need to compare your sales volume against the distance‐selling
threshold set in the country to which the goods are shipped.
In some countries, there may also be differing thresholds for

companies trading where they are not established. These
countries have general thresholds for non‐resident companies
as well as thresholds specifically for the supplies of digital
services to private individuals.
Distance selling is a great business opportunity, but it’s also
an opportunity to run afoul of the VAT rules. It’s vital for
Internet retailers to understand their VAT liabilities in each
EU state in which they’re selling. Investigations and potential
fines could result otherwise, and those are liable to dampen
the promise of a great business opportunity.
For the most part, businesses selling goods to private indi-

viduals in other countries are expected to charge and collect
local consumption taxes. In the EU, the special regime under
which this falls is distance selling, and the whole point is to
encourage free trade within the EU community by simplifying
the administration and burden of VAT.
How does the distance‐selling programme encourage com-

panies to get started on cross‐border selling? By having
countries set national thresholds, below which the seller only
needs to deal with VAT in its home country.
So, here’s an example of how the basic rules apply:
✓✓Initially, an Italian handbag retailer may sell goods to

private individuals in Germany under the local VAT
number using its home VAT rate (as it’s below the
distance‐selling threshold in the country). That would
mean that the retailer would charge German customers
VAT at 22 per cent, even though the German VAT rate is
19 per cent.
✓✓At some point, if business goes well, the retailer will
pass a country’s distance‐selling threshold, and at that
point it must apply for a direct registration in that coun-
try as a non‐established VAT trader. In the case of the
example above, that Italian retailer has now sold more
than €100,000 worth of goods in Germany. Henceforth,
Germany’s VAT is the one that applies.
✓✓The retailer continues to sell, charging the local
VAT. Handbags sold by the Italian retailer in Germany will
now carry Germany’s 19 per cent VAT, payable to German
tax authorities by way of a German VAT return.
Ultimately, VAT is a tax on the final consumer, so countries

expect that businesses will register with them and collect
their local VAT.
Do You Need Fiscal

Representation?
Non‐EU businesses operating in EU markets face some addi-
tional considerations. In the majority of EU countries, these
businesses must appoint a VAT fiscal representative. EU
businesses, on the other hand, don’t have to appoint a fiscal
representative, but rather can name a VAT agent or tackle the
compliance work themselves.
What exactly is a fiscal representative? It’s a company that

resides in the country where the activity takes place. The
fiscal representative often has to be accepted by the local tax
authority to perform this service. As the title suggests, its role
is to represent the non‐resident company in VAT matters, to
ensure they are fully compliant, and they can also share joint
liability for any tax or penalties that might be due.
It should come as no surprise, then, that the fiscal represen-

tative will require some sort of bank guarantee or monetary
deposit to be sure it’s not left in a bad spot. That guarantee
will remain in place for the period of the trading and some
period thereafter, just in case the tax authority decides more
tax is owed.
The fiscal representative will want to be sure VAT compliance

is of the highest order. That may feel like a hassle to the non‐
resident company that has already handed over a hefty guar-
antee, but the fact of the matter is, the fiscal representative’s
financial well‐being and reputation are on the line here.
How to Register
As with just about any kind of registration, you must complete
and submit a form, in this case a local VAT registration form,
along with the necessary supporting documentation.
Note that the application form is often in the local language,

so if it’s not your language, you may need assistance.
Registration options:
Portal or paper?
These days, who wants to deal with paper when you can do
business electronically? When it comes to VAT, some coun-
tries allow organisations to submit online registrations. There
are, however, many countries where you still have to submit a
paper application, or you may even have to visit the tax office
in person.
Document requirements
Here are some examples of documentation you may need
to provide when registering for local VAT outside of your
home country:
✓✓Proof of VAT or tax registration in your home country

✓✓Your company’s certificate of incorporation
✓✓Your company’s articles of association
✓✓An extract from the national company registrar, proving
the existence of your company
✓✓Proof of activity in the country where you will be doing
business, such as contracts or invoices
✓✓And if you’re appointing a local tax agent or fiscal repre-
sentative, a letter of authority or power of attorney
There may be additional documents required, depending on

the country, and you may be required to translate some of the
above documents into local language. These can either be a
sworn or standard translation.
There are some countries across the EU where you have a dif-
ferent tax number for domestic and intra‐community activity.
Tax offices will often issue you a local tax number, and you’ll
then be required to prove the need for an intra‐community
number.
Some EU countries allow you to apply for backdated regis-

trations. However, you should be aware that there could be
penalties for late registration, late filing, and late payment for
the VAT.
Each EU Member State has a slightly different format for VAT

numbers. If you provide your VAT number to your custom-
ers and suppliers in the wrong format, it’s likely your number
will not show up in the VIES system. Also, if your number is
only registered for domestic activity, it’s unlikely that it will
show up in the VIES system. If you’re using your number for
intra‐community trade, you’ll need to provide the two‐letter
country code before the VAT number.
Chapter 5
Filing and Compliance
In This Chapter
▶▶Understanding the basic compliance process
▶▶Exploring the country‐specific regulations
▶▶Knowing when, what, and how to file and pay
▶▶Generating compliant invoices
▶▶Dealing with exchange rates
▶▶Facing the consequences of non‐compliance
Y our organisation has made it through the VAT registra-

tion process. You’ve got the required VAT numbers.
Now comes compliance. This is the part of the story that
goes on and on, month in and month out, year in and year out.
Compliance is not any more fun than registration, but it’s a
critical part of your VAT journey.
This chapter spells out the basic processes for VAT filings,
including when and what to file, how often to file it, how VAT
impacts invoicing, how exchange rates enter the picture,
and what happens when you don’t comply. This chapter also
underscores how dependent all of this is on individual coun-
try regulations.
Understanding the Basic VAT

Filing Process
It’s complicated. That’s the VAT filing process, summed up in
two words. Here are two more words: manually intensive. Just
what you wanted to hear.
The good news is that there are strategies for making it a lot
less complicated and a lot less manually intensive. Before get-
ting to that, though, it’s best to get a good understanding of
the filing process.
You’ll file VAT by means of VAT returns. These are official

tax documents that spell out in significant detail all of the
facts and figures relating to your organisation’s transactions,
including what you purchase and what you sell. The returns
declare all of your organisation’s VAT transactions and any
applicable taxes, and they calculate what VAT you owe, or
what should be refunded to you. Once you’re registered for
VAT in any EU country, you must complete VAT returns.
Here are some of the common data points that are likely to
appear on a VAT return, regardless of the country in which
you’re filing:
✓✓The net sum of all taxable transactions, both sales and

purchases.
✓✓VAT charged on all taxable sales and purchases. This
includes all applicable rates.
✓✓Exempt transactions such as intra‐community supplies.
You’ll separately show arrivals from other EU countries.
✓✓And, drumroll please . . . the total VAT due or repayable.
The Country Sets the Rules

A VAT return in the EU, generally speaking, contains all of the
basic information set out above. Beyond that, all bets are off.
VAT returns vary considerably from one country to the next.
Here are some of the differences you might notice:
✓✓The number of boxes on returns: The Irish return only

has half a dozen boxes, whereas the German return has
several dozen.
✓✓The language of the return: It’s the language, or lan-
guages, of the country in question.
✓✓The submission format of the electronic file: Each
Member State handles it a bit differently.
Chapter 5: Filing and Compliance 33
✓✓Direct electronic submission: This is permitted in some
cases, but not in others. Some call for direct submission
in real time, others want submissions keyed into a portal.
✓✓Supplementary filings needed: These might include
Intrastat and EC Listings.
✓✓Exchange rates: You’re likely to need to use exchange
rates, as all tax offices would like you to file and pay VAT
in the local currency. Countries have varying processes
but most require you to use the exchange rates
of the national bank of that country or the European
Central Bank.
When to File
Just as different countries set different rules for VAT and have
vastly different VAT returns, they also establish different
schedules for when businesses must file those returns. Here
are some of the options businesses might face:
✓✓Monthly reporting: This is the most common cycle,

because it’s more frequent revenue and many countries
believe it’s the best approach for keeping tabs on the
growing problem of VAT fraud.
✓✓Quarterly reporting: This is the chosen predominant fre-
quency of some countries, but the main reason they have
quarterly reporting is to benefit companies that have
smaller turnover.
✓✓Annual reporting: This is often required in addition to
your standard monthly or quarterly reporting, but in
some countries you have the ability to file one annual
return per year under certain conditions.
The deadline systems vary, as well. Germany, for example,

requires VAT filings within 10 days of the end of the report-
ing period. The Netherlands, however, typically allows two
full months to file. Whatever the particular country requires,
keep in mind that you’ll have to file VAT returns in each of the
countries in which your organisation is registered.
What to File
This is starting to seem like a menu at a very diverse restau-
rant. Lots of choices for you to peruse. There’s a key differ-
ence, however. In that restaurant, you may feel like there’s
only one choice that’s right for you, and the chef will gladly
prepare it and send it to your table. With VAT, it’s the chef
(the taxing authority, that is) that may feel like only one
choice is the right one for you. It’s your job to figure out
which choice it is, and deliver it.
VAT returns
By now you know that the VAT return is a must, and that
it has to be completed as often as the country in ques-
tion requires, and delivered by the deadline in the manner
specified.
Whilst VAT returns vary greatly from Member State to

Member State, the European Commission is making strides
in simplifying reporting on some cross‐border transactions
through consolidated returns in certain industry sectors.
In 2015, the Mini‐One‐Stop‐Shop (MOSS, see Chapter 4) return

became effective for supplies of B2C digital services, allow-
ing businesses to report all EU sales on a single return filed
with the tax authority in their own country of establishment.
If the business is based outside of the EU, then it can elect the
country to which it wishes to declare its EU sales. It should be
noted, however, that there are plans to extend this to distance
selling.
Intrastat
VAT‐registered companies that move goods cross‐border in
the EU may be required to file Intrastat reports. These sepa-
rately list goods movements between EU Member States.
There are individual thresholds for the reporting of both
dispatches and arrivals, which are set independently by the
Member State.
Governments rely on this kind of reporting to monitor their

balance of trade and keep tabs on their economic health.
They use the reports to follow trade trends and make policy
decisions, including the establishment of interest rates.
Each Member State decides what should be reported on the

Intrastat report, but this typically includes a list of dispatches
and acquisitions with the related commodity code, mode of
transport, nature of the transaction, weight, volume, value,
and more. Column headings are required in the local lan-
guage. These reports must be submitted electronically, and
some countries require the use of XML format, while others
accept CSV.
EC Listings (recapitulative
statements)
These statements declare total B2B cross‐border activity
of goods and services, which are subtotalled by supplier or
customer VAT number. Member States determine the details
regarding how these are filed, and how often.
Each Member State sets the layout and field requirements,

and the column headings are in the local language. These
must be submitted electronically, sometimes in XML, though
some states allow CSV.
If your company supplies only a ‘modest level’ of goods to

VAT‐registered customers in other EU countries, you might
be allowed to file what’s known as a simplified European
Sales Listing. If you’re allowed to do so, the good news is that
you don’t have to file as often, and your filing is much less
detailed.
Some Member States, such as Spain, require European

Purchase Listings. These are mandatory lists of all purchases
made by VAT number in the EU.
Control statements
Taxing authorities may require the filing of VAT control state-
ments, intended to cut down on unauthorised tax deductions.
It’s a way to automate the processing of data and allow more
effective analysis to uncover such things as carousel fraud,
fraudulent invoicing, failure to invoice, or double‐dipping of
deductions.
Reverse charge sales listings

This is a highly specific situation encountered only by busi-
nesses in certain product and service segments, such as
mobile phones and computer chips. Taxing authorities such
as Her Majesty’s Revenue and Customs (HMRC) in the UK
have established a system for reporting such sales, and you
typically must submit a reverse charge sales list for each
VAT return period. The information submitted includes the
VAT number of each customer and the total net value of the
reverse charge sale to that customer.
How to File
Just as there are various means for registering for your VAT
number, there are also a variety of ways you can (or must)
file your VAT returns. The choices basically boil down to elec-
tronic means or on paper, submitted through the post.
The correct method depends entirely on the specific situ-

ation, including what you’re filing and where. Some taxing
authorities allow electronic filing, some require it, and some
don’t allow it at all.
Needless to say, the more automated the filing option, the

easier it is to file. Filing from your computer through an online
portal is convenient, and can reduce errors. One thing to note,
though, is that, like paper forms, online portals are usually in
the local language.
Making Payments
Expect to make payment promptly when you’re filing
VAT. Most countries, in fact, require immediate payment of
whatever is due.
How do you remit that payment? Most tax authorities accept

international bank transfers but some require a direct debit or
a local bank account.
VAT Invoicing
There are very specific rules set forth in the VAT Directive
that govern what kinds of information must be included on
invoices. Each jurisdiction can decide to require additional
information on invoices, and you will often see more informa-
tion required for B2B invoices than B2C invoices.
Here are the basics that must appear on your invoices (some
of these items are things you would already put on an invoice,
anyway):
✓✓The date
✓✓The name and address of the supplier, as well as the sup-
plier’s VAT number
✓✓The name and address of the customer
✓✓A unique invoice number, one that is generated
sequentially
✓✓A description of the goods or services, including the
quantity if applicable
✓✓The VAT rate applied to the transaction
✓✓The net VAT due and gross value of the supply
✓✓Any discounts applied, with details
Do your invoices include zero‐rated items or exemptions?

If so, your invoice must include specific messages explaining
why they’re zero rated or exempted in the local language.
These messages should include a citation for the applicable
article within the VAT Directive or local country legislation.
There may be additional invoicing requirements, depend-

ing on the country. For example, some require you to have
sequentially numbered invoices that are specific to the sales
within that country.
Certain countries also have requirements regarding how long

you must store hard copies of invoices. Expect to hang on to
the hard copies for at least five years, perhaps even ten, in
European countries.
Non‐compliance and Penalties

VAT is complicated, VAT is confusing, VAT is no fun. VAT is
also very serious business, and the taxing authorities are not
kidding about the rules.
There are, most certainly, penalties for failing to comply with

VAT requirements. As with everything else, the consequences
of non‐compliance vary from one place to another, but avoid-
ing the consequences is worth all the trouble.
Countries often penalise late registration, late filing, and late

payment of VAT. This can also be accompanied by compound
interest, so sorting problems in the quickest fashion is in the
interest of every business.
Chapter 6
Ten (or so) Helpful VAT
Resources
In This Chapter
▶▶Connecting with reporting assistance
▶▶Asking for registration help
▶▶Outsourcing your VAT compliance
▶▶Tapping into other related topics
R ead through this book and you’ll be exhausted just

imagining the labour that could go into the work of
VAT reporting and compliance. As the meme notes, however,
there’s an app for that! And there are very smart people out
there just waiting to help you along the way.
This chapter shares a number of suggestions for where you

can turn for help. The experts at Avalara, a cloud‐based tax
automation company that prepared this book, have created
a series of solutions tailored to very specific tax situations.
They also are available in person and on the phone, whether
you have a simple question or are ready to just let someone
else handle this headache. Read on for suggestions of handy
resources and assistance.
Using VAT Reporting Software

Avalara’s VAT Reporting is, as the name suggests, a report-
ing and filing solution. It integrates with your existing ERP,
accounting, and MIS systems to pull out exactly what’s needed
to produce compliant VAT returns. It can even file them at the
right time, in the right place, format, and language.
Automation is more than a matter of easing the headaches

of compliance and increasing efficiency for large enterprises.
Increased accuracy is an incredibly valuable benefit, as it
makes your organisation less dependent on potentially unreli-
able spreadsheets.
How does VAT Reporting work? It checks in daily with your

accounting and ERP systems, downloading transaction infor-
mation and checking for potential anomalies and exceptions
that need quick attention. When it’s time to file returns, it
submits them in multiple countries, in the appropriate filing
format. It files electronically when possible, and on paper in
the local language when automated filing is not permitted.
And, of course, it’s kept up to date on the ever‐changing rules.
Determining the Right

VAT Treatment
It takes a lot of expertise to know what kind of VAT treatment
applies to a particular transaction. Expertise with an excellent
and up‐to‐date database of regulations in all of the countries
where VAT is charged. You need to know the correct VAT
treatment to reduce your risk of fines and penalties, and
have the utmost confidence in your international business
operations.
The good news is there are many automated tools available to

determine the right treatment, like VAT Expert from Avalara.
The solution plugs right into a comprehensive online VAT
regulation library to ensure the best information. Users of this
solution enter details about complex VAT transactions, and
find out how they need to be taxed.
This application comes preloaded with various types of sup-

pliers and customers, and all of those can be customised to
meet specific requirements. Its database covers a wide range
of goods and services, with pertinent information about VAT
types in different countries. VAT Expert can also create VAT‐
compliant invoices electronically.
Chapter 6: Ten (or so) Helpful VAT Resources 41
Calculating Final
Transaction Costs
Work your way through the supply and production chain.
You’re adding VAT here, subtracting it there, paying for this,
charging for that, again and again and again. When you’re
doing business cross‐border, you run into a host of complex
taxes, duties, fees, and shipping costs. How confident do you
feel that you’ve arrived at the correct answer when it comes
to cost?
There’s automated help for that, too. Avalara’s LandedCost is

for companies of all sizes, and its purpose is to calculate the
final cost of global commerce transactions, accurately and in
real‐time. That’s important, because customers are bound to
be frustrated if they run into unexpected costs.
Getting into Cloud‐based Sales

and Use Tax Compliance
There’s a good chance you’re selling into the U.S. or at least
thinking about doing so. If that’s the case, you might be think-
ing more about sales and use taxes, rather than VAT.
If you think VAT is complicated, with lots of different sets of

rules, consider that U.S. sales and use taxes are set by thou-
sands of different taxing jurisdictions. How can you possibly
keep up with that compliance challenge? Outdated tax infor-
mation and obsolete data make things incredibly difficult to
manage.
One cloud‐based solution is AvaTax. It’s a sales and use tax

compliance tool, built for companies that are trading into
and across the U.S. It’ll connect with your ERP, point‐of‐sale,
and e‐commerce systems to automate the whole sales and
use tax compliance burden. In fact, it can integrate with more
than 500 other applications to gather the information it needs
to get the job done. What you get is a single tax schedule,
instead of hundreds or thousands of them.
Getting Assistance
with Registration
Local expertise is vital – because, as you’ve now come to
understand, every country has its own rules, definitions, and
thresholds. And what works in one country may not work in
another.
Wherever you’re doing business around the world, it helps to

be able to easily connect with local specialists who can act on
your company’s behalf – specialists who know the nuances
of the various countries involved. They’ll know when you do
or don’t need to register, and if you do, they can handle the
entire process of registration and setup.
Services like Avalara VAT Registrations offer such local knowl-

edge, providing a single point of contact regardless of where
you are in the world, or where you’re doing business.
Finding Help for

Managing Returns
As mentioned, international VAT compliance can be tough.
You’ve got better things to do than worry about your VAT
returns.
That’s where services like Avalara Managed Returns come in.

The role of these services is to prepare and file VAT returns
on your behalf, ensuring accuracy and timeliness. By out-
sourcing the entire process to Avalara’s experts, you can
sleep easy knowing that your company’s compliance needs
are met.
In the case of Avalara, experts help determine your obliga-

tions, manage your registrations, handle return completion
and error checking, and file your returns in local languages.
They’ll deal with Intrastat and European sales listing com-
pilation and filings, and deal with local tax authorities, even
during audits. If you need fiscal representation, they’re avail-
able, and they can give you access to special VAT import
deferment schemes.
Chapter 6: Ten (or so) Helpful VAT Resources 43
Connecting with Other

Taxation Expertise
Face it, you really don’t like taxes. Who does? It turns out,
there are people out there who are fascinated by the world of
taxation, who are eager to keep up with the rules and regula-
tions, and are passionate about helping others. Connecting
with such people will make your life a whole lot easier.
This book focuses specifically on VAT, and this chapter has

whizzed through a number of ways to get both automated
and human assistance with VAT compliance. But experts at
Avalara speak the language of other taxation, too, so don’t
hesitate to ask.
Seeking Information Online

There’s a wealth of VAT‐related information online, with vary-
ing degrees of accuracy and helpfulness. One of the most
comprehensive and authoritative online sources of VAT
information, www.VATlive.com, also happens to be free and
covers breaking VAT news.
The information on this site is maintained constantly, giving

advice that’s both general and country‐specific, with sections
focused on most countries where VAT is a thing. Register on
the site and you can get regular VAT updates sent to your
inbox.
Learning About Related Topics

You’ve reached the end of International VAT For Dummies,
Avalara Special Edition. If you’ve found this information
helpful, you might also like some of Avalara’s other reading
materials.
For example, Sales & Use Tax Compliance For Dummies takes
a similar approach to exploring the ins and outs of sales and
use taxes. This book brings the subject to life and makes
it understandable. Head to www.info.avalara.com/
ForDummies to download your copy.
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Avalara Special Edition

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ISBN 978‐1‐119‐45223‐2 (pbk); ISBN 978‐1‐119‐45220‐1 (ebk)

Project Editor: Claire Ruston Avalara Review Team: Russell Martin,

Chapter 1: Getting to Know VAT. . . . . . . . . . . . . . . . . . . . . 3

Chapter 2: Types of Taxable Transactions. . . . . . . . . . . . 9

Chapter 3: Five Considerations for Applying VAT. . . . . 15

Chapter 4: Understanding Registration

Chapter 5: Filing and Compliance . . . . . . . . . . . . . . . . . . 31

Chapter 6: Ten (or so) Helpful VAT Resources. . . . . . . . 39

The fact is, business systems typically don’t manage the

That requires a lot of effort from people in your company –

You’re going to be dealing with a VAT burden, whether you’re

About This Book

Icons Used in This Book

Check out the adjacent paragraph for some helpful advice on

This is a subject brimming with complications and techni-

Any discussion of taxes is going to be filled with potential

Where to Go From Here

T here’s no escaping it. You need to get to know VAT,

This chapter explores the basics of VAT, including what it

VAT is an indirect or transaction tax that is levied on the

If you’re talking about an article of clothing, for example, it

When you think about that supply chain, overly simplified in

Complex, yes, but also a highly efficient mechanism, espe-

VAT is levied throughout the supply chain and calculated

The invention of VAT

Some believe the idea was tossed about in Germany in the

As the idea has evolved, the implementation and rate struc-

Meanwhile, the growth in global commerce along with

Where to find VAT

One could almost say countries with VAT range from A to Z.

How VAT Works

VAT in Europe is governed by Directive 2006/112/EC (the EU

Here’s the basic concept of how VAT works:

✓✓There are a number of things that determine whether a

••Whether stock is held in that country

How VAT is calculated

✓✓Input VAT: As the name suggests, this is the VAT that

VAT is calculated as a percentage of the supply. The percent-

For example, standard VAT rates might be 7 per cent in

The EU specifies a minimum of 15 per cent as a standard rate.

Here are some examples of typical systems that often must

✓✓Sales, purchasing, and accounting systems, including

Different countries, different

There are, however, some ground rules that bring a bit of

The European common system of VAT on goods and services

All of the EU Member States are required to incorporate

The VAT Directive establishes a framework for determining

There are all sorts of optional elements and opportunities for

Here are some of the significant areas covered by the VAT

✓✓Place of supply: One of the most difficult things to

T here are four taxable transactions in EU VAT: the supply of

This chapter explores some of those transactions and the

Taxing the Supply of Goods

Here’s how it would work for a relatively simple example, the

Figure 2-1: How VAT applies to the manufacture of a wooden chair in Sweden.

✓✓The grand total: This simple example of a value chain

This example spells out the general principle of calculating

For example, the sales process might begin with a customer

Figure 2-1: How VAT applies to the manufacture of a wooden chair in Sweden.

Figure 3-1: A triangular transaction.