VAT issues in the European Union are harmonized. To put it simply, the European Union has established a "framework" within which the authorities of the Member States can operate when creating regulations applicable to VAT. An example of this is the level of the standard VAT rate, which in the Member States cannot be lower than 15%, or the categories of products and services to which the reduced VAT rates apply.
Want to know details about VAT in Germany, France and Great Britain? Read on!
1. VAT OSS
Talking about VAT registration, one should mention the special VAT OSS (One-Stop-Shop) procedure. It entered into force on the same day as the above-mentioned limitation. It enables entrepreneurs to settle all sales from B2C transactions in individual EU countries with one collective declaration. Moreover, it also allows for avoiding local VAT registration. However, it should be noted that VAT OSS does not apply to the storage of goods. The procedure itself requires prior registration, which the Polish entrepreneurs can do at the Second Tax Office Warszawa-Śródmieście, Poland.
2.VAT in Germany
Mehrwertsteuer and Umsatzsteuer
In the context of VAT in Germany, we must distinguish two terms that Germans often use interchangeably – that being Mehrwertsteuer and Umsatzsteuer. The word Mehrwertsteuer can be translated as VAT. It refers to the added value imposed on products and services at various stages of production and distribution. Umsatzsteuer stands for a turnover tax, which includes any taxes imposed on products during production, distribution or consumption. That includes, among others, Mehrwersteuer and other sales taxes.
VAT in Germany: Steuernummer and Umsatzsteuer – Identifikationsnummer (USt-IdNr)
When it comes to German terms related to taxes, it is necessary to mention Steuernummer and Umsatzsteuer – Identifikationsnummer (USt-IdNr). They are necessary for proper settlements and conducting business in Germany. The first one is the equivalent of the Polish NIP number. It’s necessary to enter into transactions with German contractors and for identification at the local tax office. As for Umsatzsteuer – Identifikationsnummer, it’s the equivalent of the Polish EU VAT. It’s needed to establish intra-community transactions when conducting business in Germany.
VAT in Germany – VAT rates
Basic VAT in Germany is 19%. It covers all goods and services that are not subject to special rates – a reduced rate of 7% or a zero rate. The aforementioned 7% reduced VAT rate applies to, among others:
However, these are only examples. The entire list of products and services for reduced VAT rates introduced in Germany can be found in the German Turnover Tax Act. For this, see Umsatzsteuergesetz.
- selected foodstuffs and their delivery, e.g. milk and dairy products,
- medical equipment for the disabled,
- e-books, audiobooks, newspapers and magazines (except those containing content harmful to minors or over 50% of advertisements).
VAT registration in Germany
Foreign companies wishing to register for VAT in Germany must register with the local tax office. Its choice depends on an unusual criterion. Namely, the first letter in the company name:
The registration process takes place in Germany by correspondence and requires the entrepreneur to provide the necessary documents. These include the originally signed: Fragebogen (registration application) and a cover letter. It’s also required to provide copies of an identity document and confirmations of having a bank account and EU VAT registration. A copy of the founding act with a plain German translation and the company’s entry in the register of companies, together with a certified translation, should also be attached. If everything goes well, VAT registration in Germany can take about 1–2 months.
- For letters from A to G, it will be the Tax Office in Hamelin.
- For the letters H to L, this will be the Tax Office in Oranienburg.
- For the letters M to R, this will be the Tax Office in Cottbus.
- For the letters S to Ź, this will be the tax office in Noerdlingen.
VAT returns in Germany
In Germany, VAT returns must be submitted on a monthly, quarterly or annual basis. The monthly declaration is the default one. The quarterly declaration is available to companies that did not exceed EUR 7,500 in VAT liability in the previous calendar year. Deadline for submitting declarations in Germany falls on the 10th day of the calendar month following the settlement period for monthly and quarterly declarations, and on July 31 for annual declarations.
3. VAT in France
France is the first country in the world to introduce VAT, which has been in force since 1954. It is known as taxe sur la valeur ajoutée.
VAT rates in France
The standard VAT rate in France is 20%. In addition, there are also two reduced rates, one super-reduced rate and a zero rate. It’s worth noting that the term super-reduced VAT rate refers to a rate that is less than 5%. The products and services are subject to selected rates are:
For a full description of the products and services that qualify for the selected VAT rates, see article 278 of Code Général des Impôts.
- 10%: unprocessed agricultural products, social housing, firewood,
- 5%: food products, books, electricity,
- 1%: state-reimbursed drugs, sale of live slaughter animals, some press publications,
- 0%: intra-community and international transport (except road and inland waterway transport).
VAT registration in France
To obtain a French VAT number, entrepreneurs must register online with the local tax office. I.e. Direction des Résidents à l’Etranger et des Services Généraux. For this purpose, the entrepreneur must provide the office with a set of certain documents. That being an originally signed registration application, a copy of the memorandum of association or articles of association together with a plain translation into French. The confirmation of the entry in the register of companies together with a certified translation is needed as well. In addition, it’s necessary to provide copies of an identity document, confirmation of having a bank account and EU VAT registration. It is worth adding that for VAT registration in France, for non-EU companies, fiscal representation is necessary. In the case of a properly conducted process, VAT registration in France can take, as in Germany, about 1–2 months.
VAT returns in France
After registering for French VAT, the taxpayer is obliged to submit tax returns in France. These can be submitted on a monthly or quarterly basis by the 19th day of the month following the selected period. However, quarterly declarations are intended only for companies whose VAT liabilities in the previous 4 quarters did not exceed EUR 4,000. On the other hand, an annual VAT declaration in France is not required. In addition, VAT in France should be paid by direct debit. Otherwise, the VAT payer may be fined.
4. VAT in the United Kingdom
VAT registration in the United Kingdom is required in circumstances similar to those described for registration in Germany or France. I.e. importing and exporting goods, storing goods in the UK or organizing events. In addition, there are two more cases requiring a VAT declaration in the UK that are worth highlighting. The first is exceeding GBP 70,000 for the sale of goods and services to buyers from the UK. Due to Brexit, the previously mentioned ESPO sale limit does not apply in this country. The second situation is the receipt by VAT payers in the UK of services that are compliant with the reverse-charge principle. That means that the buyer assumes the obligation to settle VAT.
UK VAT rates
Before we get to the description of VAT registration in the United Kingdom, let’s talk about the VAT rates. There are three in Great Britain:
For more information on products and services subject to specific VAT rates in the UK, visit gov.uk.
- 20% – the basic VAT rate
- 5% – applies to e.g. car seats for children, heating for home use,
- 0% – applies to e.g. – selected goods, groceries and clothes for children.
UK VAT registration
The VAT registration process in the UK can be confidently described as problematic. However, before we describe the perturbations that an entrepreneur may encounter, let’s emphasize that the registration takes place online through a government site. The tax authority responsible for VAT registration of entrepreneurs in Great Britain is the British tax office. Namely, Her Majesty Revenue & Customs (HMRC). VAT registration in the UK begins with the submission of a registration application. It must be accompanied by a number of documents similar to those we have listed in the case of registration in Germany or France. However, as we mentioned above, the registration process can be problematic, and sometimes takes up to even a year.
Problems with VAT registration in the UK
The first difficulty is that British officials require additional certificates and forms that are not easy to obtain. For example, a contract with a carrier or an agreement to establish cooperation with a marketplace platform, which companies often sign only after VAT registration.
If officials require such documents, the entrepreneur must send them by post, which can be time-consuming. If the letter or package does not arrive on time or at all, the registration process may be cancelled, requiring the entrepreneur to start over. Another problematic issue regarding VAT registration in the UK may be communication. The entrepreneurs can contact HMRC via e-mail, telephone, contact form or hotline. With traditional mail, as noted above, letters may not arrive on time or may not arrive at all. In the case of e-mail inquiries, it may happen that officials do not respond. However, when sending a question via the contact form and receiving a reply, we cannot write back to the official. Moreover, if we send another form, there is a small chance that it will go to the same official.
VAT declarations in the UK
In the UK, VAT payers usually submit returns every three months. However, this should not be confused with quarterly returns. The UK tax period starts for the payer upon successful registration. Taxpayers have one month and seven days to submit the declaration, counting from the end of the reporting period. Moreover, in Great Britain, declarations are submitted electronically in the form of MTD for VAT, the British equivalent of the Polish JPK file.
Registration and obtaining a VAT number is a process necessary for the functioning of the company on various markets of the European Union. It allows for proper tax settlement, commonly known as value added tax. However, it should be remembered that the VAT registration process itself differs depending on the country. As well as the rules for submitting declarations and the types of VAT rates with which selected groups of products and services should be taxed.
Given all of the above, before entering new markets, an important step is to properly analyse them. It is recommended to consult an expert in the tax industry. You can also commission registration to specialists. This will save your time and allow for avoiding penalties that may result from incomplete knowledge of the regulations.