Working with VAT on intra-Community transactions
Purchases and sales of goods and services between businesses in the European Union are subject to special taxation regulations. Debitoor supports EU VAT and automatically helps you if you’re selling or buying in other European countries. Still, you need to make yourself familiar with the different intra-Community transactions so you know when to pay and not to pay VAT.
When selling to other companies in the EU, the ‘zero rate’ may apply:
- If you sell or export goods to companies in other countries in the European Union - what's known as 'intra-Community supply' - you do not have to charge VAT on the invoice if the company you're selling to is VAT-registered.
- If you provide services to companies in other EU countries, you normally don't charge VAT because these operations are exempt as well. However, special rules apply to some services like communications and media services.
Selling to a private person in other EU countries:
- If you sell goods or services to a particular person in a country within the EU, you must include your country's VAT on invoices - as if it were a business transaction in your own country.
The 'reverse charge' when importing goods or services:
- If you import products or services from companies or professionals from other countries in the EU - what's known as 'intra-Community acquisitions' - you have to report VAT even though the invoice received will say 0% VAT. This VAT is known as acquisition tax and you can normally reclaim this if the acquisitions relate to VAT taxable supplies that you make.
Read more about acquired goods and how to deal with the reverse charge at Gov.uk
Requirements for intra-Community transactions
It's important to follow these guidelines when dealing with transactions in the EU:
- If your customer can provide you with a valid EU VAT Registration number, you can apply the zero rate of VAT to the sale
- The VAT will be due in the destination country from the customer on acquisition of the goods
- You must keep paperwork that shows both the seller's and buyer's VAT registration numbers on the invoice
- You must number your sales invoices in sequence
- You must also obtain and keep valid evidence that the goods have been removed from the UK within certain time limits to be able to zero rate
All companies, freelancers and other professionals wishing to work with intra-Community transactions, *have to be registered for VAT* in another member state in the European Union.
After receiving your customer's VAT number, you should check that the VAT number is given in the right format for that country and that it matches the customer's name and address.
By checking out the European VAT number validation system you can do a search and verify the VAT number of your customer.
You can also contact HMRC to check a VAT registration number and confirm that the name and address belong to that number.
How does the EU VAT affect my accounting?
The [reverse charge](/dictionary/reverse-charge) is an important part of buying and selling tax free within the EU.
There will be no VAT on the invoice when you buy a product or a service from another VAT-registered company in the EU. This means that you are responsible for calculating and reporting the numbers to HMRC.
Conversely, if you’re the one selling a product or a service to another VAT-registered company in the EU, you do not VAT the invoice. The buyer calculates and reports his own VAT in his home country.
When working with EU VAT in Debitoor, you just have to make sure that you don’t VAT the invoice when you’re selling to VAT registered companies within the EU.
You can read more about dispatching your goods within the EU at Gov.uk, or check out the basic guide on importing and exporting by HMRC.