VAT & EUROPEAN UNION
Since January 1st 1993, Customs barriers between European Union member states have been disbanded and there will no longer be a requirement for customs declarations or clearance for most imports or exports moving between E.U. member states.
Along side these measures a unified VAT system has been introduced throughout the E.U. The effect of this is that henceforth any company which supplies goods or services within the E.U. will have to be registered for VAT somewhere within the E.U.
Services are defined as being those services listed in Schedule 3 to the UK V.A.T. Act 1983 and include transfers and assignments of intellectual property, advertising services, consultancy services (including services provided by engineers, lawyers and accountants) financial services and the supply of staff.
Thus any E.U. incorporated company supplying goods or services to another E.U. incorporated company or individual should be registered for VAT. In addition any non E.U. incorporated company purchasing goods in one E.U. state and selling those goods in another E.U. state should be registered for VAT somewhere within the E.U.
An E.U. incorporated company trading only with individuals or companies resident outside the E.U. need not register for VAT and a non E.U. incorporated company which sells goods or supplies services into the E.U. or purchases goods or services from the E.U. but does not do both need not register as such a company would be trading with not within the E.U. The onus for the collection of VAT will be placed upon the recipient of the goods in the destination country and that recipient will be required to account for VAT to his home country authorities. In general three standard situations will arise
The supply of goods or services from an E.U. member state to a non E.U. country. In this case the goods can be zero rated for VAT purposes as long as the exporter can show evidence to prove that the goods have actually been exported i.e. an invoice addressed outside the E.U. and details of the transport arrangements showing the physical movement of the goods outside the E.U.
The supply of goods or services from one E.U. member state to another E.U. member state. Here the invoice may be zero rated as long as the recipient is registered for VAT and the exporter can quote the recipient's VAT number on the sales invoice and show the physical movement of the goods outside the country in the same way as above. If the supplier cannot quote the VAT number of the recipient then VAT will have to be added to the sales invoice and paid to the exporter by the recipient.
The supply of goods and services from a non E.U. member state into the E.U. In this situation import duty and VAT will have to be paid on the goods/services.
To avoid abuses of the system there are a number of anti avoidance measures and special rules apply to the sale of new motor vehicles, boats, aeroplanes and other methods of transport where generally VAT must be paid by the supplier. Logically any E.U. incorporated company which needs to register for VAT should so do so in its place of incorporation but some difficulties exist.
These will depend upon where the company is incorporated and where VAT registration is required. Due to the complex nature of this subject, we recommend that you contact us to discuss your own situation and obtain a quotation according to your circumstances.
Let our company arrange the registration of your offshore company for VAT purposes.
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