Businesses who provide goods or services in a foreign jurisdiction with a VAT regime must comply with the relevant VAT laws of that country. There are several cases where it will be a legal obligation for a company to register for VAT in the country because they are undertaking taxable business activity.
Such activity includes:
- Importing goods into the country for sale or distribution
- Buying and selling goods locally
- Exporting goods from a foreign country
- Storing goods in a warehouse, as consignment stock or in a fulfilment centre
- Organising an event in the country (specifically if there is paid admission to the event)
It is the company’s responsibility to register for VAT prior to commencing taxable transactions and once registered, one must comply with the compliance and reporting requirements.
Importing into the EU
When goods are imported into a country with a VAT regime, import VAT is charged as a percentage of the value of the imported goods. In addition to the VAT, customs duties will also be payable, depending on the type of goods.
The European Union has a special definition of imports when it comes to VAT: a transaction is only defined as an import if the goods originate outside the EU. Once the goods have been imported into the EU they are considered in “free circulation” and simplification measures apply for movements of goods between EU member states.
The practical issue of clearing goods through customs depends solely on who is responsible for the import. The incoterms of a transactions will usually define who takes on all the fiscal responsibilities and costs of the import.
In most cases, depending on whether the taxable supplies after the import are made to B2B or B2C, the non-resident company making the import will need to obtain a Non-Resident VAT registration. Over and the above the obligation to register for VAT, this may be the only way the company can claim back their Import VAT.
Hosting Events in the EU and around the world
There are special rules that govern the services that surround events, exhibitions and conferences in the EU.
There are various streams of revenue associated with an event, including advertising, sponsorship and sales. However, the most common income source is the cost of attending the event, or admission.
Almost all services relating to an event will not have VAT consequences, but admission is an exception to the rule – it is subject to VAT in the country where the event takes place. In addition to admission, the other business activities that may create an obligation to register for VAT in another Member State include:
- Stand rental
- Catering services
Domestic legislation varies, and particular attention should be given to supplies which consist of more than one component, for example sponsorship packages. In this instance, it may be that one VAT treatment can apply, or the supply may potentially require an apportionment.
Where the obligation to account for local VAT arises because of supplies in relation to an event, a VAT registration in that Member State is necessary.
When registering, businesses should ensure they comply with the local VAT rules in relation to the event, for example local invoicing requirements and whether the extended reverse charge applies.
It is not always clear whether your service will be considered admission or not since there are various different kinds (ticket sales, online registration for delegates etc.), so it is important that you seek advice in order to understand your VAT obligations several months prior to the event.