Among our Customers the following question is very popular – If Your company is not located in Europe, how would you get a VAT number? First of all you probably need to sign up for EU VAT to sell your goods in the EU. There are multiple solutions, one is company registration in Europe the other one is opening branch office or representative office. The bottom line is the fact that the method of VAT registration is quite easy.
Do you require an EU VAT number for your company?
You may be required to sign up for VAT if you ever do trade in Europe while applying VAT taxes to every single of your EU sales. In fact, even if you do not satisfy the requirements, it is feasible to sign up willingly. Registration has some advantages, and we will investigate them afterward!
Let us first know more about VAT and why it is imperative
In the EU and across the globe, VAT is the acronym for value-added tax. It happens to be a consumption tax which is charged incrementally all through the path of a product to the market, depending on the net value appended to every single phase. It is levied in the EU as a tax based on the destination, and this implies that the precise rate of tax shall be premised on the buyer’s location.
VAT functions in a couple of ways, B2c as well as B2B. Firstly, the buyers of a product or service in the EU are to be taxed. The VAT tax is shown on a receipt or an invoice as a distinct line item. The vendor then picks up the client’s VAT and keeps it till the tax season, and then they pay it to the tax agency involved, sometimes after company registration in Europe while applying for the VAT you need to deposit some amount depending on your activity.
Second, VAT imposed on input products and services is charged from a company. The business obtains credit for the VAT taxes that have been already paid once the time is ripe for filing a tax return. In this way, the gross tax burden for the company is lowered. You will likewise come across a special tax system known as the reverse-charge mechanism with B2B transfers between VAT-registered enterprises. However, companies must possess a VAT number so as to receive the advantages resulting from a reduction in VAT.
A VAT number happens to be an identification code for the VAT number allowing the authorities to track the registered company’s VAT activity. All these activities consist of tax credits received, VAT paid, as well as VAT taxes charged plus accumulated from consumers.
VAT Number Requirements after company registration in Europe
Tax registration parameters are the decisive factor for whether your company has to sign up for taxes or not. This is valid worldwide. Governments name a specific total annual sales amount and you can hope to sign up for local taxes if your company reaches that particular number in terms of sales within that nation.
You will come across something known as a “nil-registration threshold” for foreign companies that are marketing in the EU. This implies that if you are doing trade in the EU, you must make an application for a VAT number irrespective of the gross sales. The only exception would be if you are operating an e-Commerce company which has specific VAT thresholds within the EU.
Acquiring a VAT number provides many advantages. You might choose to simply surge ahead and sign up your company for EU VAT once you read about them below!
Top advantages of making applications for a VAT number as a non-EU company, without company registration in Europe
Acquiring the VAT number offers many advantages. If one of the following interests you, obtaining a VAT number might be a smart idea.
Evade financial punishments
It is not unusual for a small company to exceed the VAT threshold by its taxable turnover. You’re going to get penalties and fines if that occurs to you and you are not aware of it. Before you actually need it, it will be a sensible idea to make an application for a VAT number.
Enhance your business profile
A number of global enterprises are not prepared to operate a business with small, non-VAT-certified enterprises. Make applications for a VAT number so as to grant your company validation as well as scale perception. It helps you to operate a business with bigger companies.
Get refunds from EU VAT
Companies that are registered with VAT can claim VAT tax on products and services procured for their company. This will lessen the taxable income of your company in the EU and save you cash as well.
Bank account for your company!
Having VAT number in Europe it’s much easier to open bank account in Europe.
How to obtain EU VAT in case you are a foreign enterprise
Each nation within the EU has a VAT system of its own. Each system produces a VAT number which encompasses sales across Europe, but outside the nation where your company headquarters are located. We have described the steps required to obtain the VAT number using Ireland as an instance such that you can understand the registration process better.
1. Select a particular EU country and register by using their VAT MOSS for that specific nation. The Irish VAT MOSS is the preferred choice for most overseas companies since it’s designed in English in an easy manner. (You are eligible to register in any one of the 28 member states. You may want to sign up in Spain, where all your services are published in Spanish, provided your company is actually South America based, for instance. However, there is a threat of the complex and difficult MOSS portal possessed by these other nations.)
2. Add information as well as bank account details for your business.
3. Enter your contact details following that.
4. You will be inquired regarding the historical record of your company’s VAT.
5. Then you will be sent to a summary page by the portal where all the information that you have entered can be viewed. Ensure that everything is correct!
6. Send. And that’s all!
You will obtain your VAT number digitally or by e-mail.
What happens once you receive the EU VAT number or your company registration in Europe is accomplished
In order to trade in one of the 28 Member States, it will be imperative to ask for the VAT Number provided, of course, if you happen to be a non-EU company.
Consequently, make sure you comprehend the functioning of value added tax and also how to obtain a value- added tax number. Following this, make an application for the number employing the example cited earlier.
What is going to take place after having your VAT number? Well, you must begin to add VAT tax to every single sale just like a registered company. Based on whether the exchange is B2C or B2B, you will come across a number of special regulations. And perhaps the most complicated part: each nation comes with its own value-added tax rates.
Do not forget to find experienced accountant who will assist you to submit all required declarations and accounting reports.
If you are interested in company registration in Europe or require additional information about VAT regulation, please feel free to contact our experts! Company registration in Europe, for instance in Estonia takes just couple days.