EU VAT compliance
For businesses with an EU VAT registration, and providing taxable supplies of goods or services, there are a number of requirements to follow to ensure they are fully compliant with European VAT regulations. These rules are set by the EU in Brussels, and detailed in the VAT Directive. All member states of the EU must then implement these VAT compliance obligations into their own laws.
Below is a summary of the areas covered by the EU VAT compliance rules.
Companies providing taxable supplies must obtain a valid, unique EU VAT number from their home country. If they are also buying and selling goods in another EU country, they may have to register there, too. See our EU VAT registration briefing. This will give them a valid VAT number which they can record all transactions against. Businesses can also provide this number to their foreign EU customers to ensure they are correctly charged nil VAT on intra-community supplies of goods or services.
Companies are obliged to produce closely-defined VAT invoices for any transaction liable to VAT. This includes supplies made to both other VAT-registered companies, as well as to consumers (there are exemptions). The EU’s VAT Directive stipulates the basic information that should be provided on a standard invoice. This includes:
- Name and address of the supplier and their VAT number
- Name and address of the customer
- Unique and sequential invoice number
- Description, including quantity if applicable, of the goods or services
- VAT rate applied
- Net, VAT due and gross value of the supply
- Details of any discounts
- A clear indication if the transaction is an intra-community supply with nil VAT
Many countries increase the basic invoice disclosure requirements from the above. For example, requiring the seller to list their company registration number and address. Countries will also stipulate the length of time a company must store hard copies of invoices. In Europe, this typically ranged from five to ten years.
VAT accounting Records
Business will be required to maintain full accounting records to support their VAT transactions. For the most part, companies’ local accounting records will be sufficient. However, some countries’ VAT accounting demands can prove challenging, e.g. Italy and Hungary.
To report the vatable transactions undertaken by a business, periodic VAT returns will be required. This includes totals for intra-community supplies. All of the EU member states have different return forms, and set their own reporting calendar. Most countries pick either monthly or quarterly reporting. This increasingly depends of the volume of trade. See our EU VAT Return briefing. Many countries now permit, or oblige companies to file online. Some countries will also require an annual return (e.g. Germany and Italy).
The EU requires countries to impose a monthly or quarterly Intrastat reporting obligation on VAT registered companies which separately lists all B2B intra-community supplies of goods and services. This includes sales (dispatches) and purchases (arrivals) of goods across EU borders, as well as supplies to the company itself. Sales direct to consumers, B2C, are not required. There are separate Intrastat reporting thresholds for EU countries.