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.

Contents

Geographical extent

Included areas

Excluded areas

Reasons:

  1. Not part of the EU as overseas countries and territories.
  2. 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).
  3. 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

See also

References

  1. ^ HMRC VAT Notice 725, p.21

External links