European Union VAT area
The European Union value added tax area is a territory consisting of all European Union member states and certain other countries which follow the European Union's (EU) rules on value added tax (VAT). The principle is also valid for some special taxes on products like alcohol and tobacco.
Goods are only considered as imported or exported if they enter or leave the area. The VAT percentage does, however, differ from country to country within the area, which is a complicating factor, especially when, for example, an Internet-based reseller in one EU country sells to an EU customer in a different EU country.
When goods or services are sold to a company across a border within the area, either the buyer pays the sales country's VAT to the seller, or it is possible to register the transaction as an inter-company sale with no VAT being collected. If VAT has been paid the buyer cannot include it in their VAT accounts like VAT paid locally.
When goods or services are sold (and sent) to a private person across a border within the area, the buyer usually pays the sales country's VAT to the seller, and does not pay any VAT in the buyer's country. But if the seller's annual sales of goods to the buyer's country exceed a threshold (which varies by country), the seller must instead charge VAT in the buyer's country. These are known as the distance selling rules.[1] When a private person visits another EU country and buys goods, the seller does not have to take special action, just claim the local VAT, and the buyer can bring it home for personal use or gifts without limits.
EU sellers may validate the VAT number of a buyer residing within the EU Value Added Tax Area using VIES.
Geographical extent
Included areas
Excluded areas
- not included in Italy: some parts bordering to Switzerland
- not included in United Kingdom:
Reasons:
- Not part of the EU as overseas countries and territories.
- Areas excluded from VAT area by Article 6 of Council Directive 2006/112/EC of 28 November 2006 (as amended) on the common system of value added tax (OJ L 347, 11.12.2006, p. 1).
- Excluded by Article 28 of the Act concerning the conditions of Accession and the Adjustments to the Treaties (22 January 1972).
Areas with special rules
- Sweden does not want to accept the VAT union regarding alcohol (see Systembolaget) and tobacco shipped to private persons. Sweden has had a law forbidding such trade, but a court has interpreted the EU law so that it must be allowed. Still Swedish alcohol or tobacco tax have to be paid even if the sales country's tax has been paid or else the goods may be confiscated by the Swedish customs. These taxes must be paid in full to the Swedish tax authority before the goods are sent. A form has to be posted to the tax authority before the goods are sent and a different form has to be posted to the tax authority within five days after the goods have arrived. The posting of the forms and paying of the taxes is handled by the party (buyer or seller) who is responsible for the transportation of the goods. The first form has a mandatory field where you have to fill in a parcel identification number which may cause problems if the shipping option used doesn't use parcel identification numbers. The second form exists in two variants, one for tobacco tax and one for alcohol tax, and you need to submit both forms if you need to pay both kinds of tax. The first form only exists in one variant where both taxes are specified.[1][2] Since 2003, alcohol and tobacco for personal use can be brought into Sweden without a specific limit when travelling.
See also
References
- ^ HMRC VAT Notice 725, p.21
External links