VAT registration

About VAT registration

VAT registration in a foreign country is often a necessary and difficult task. Foreign entities, regardless of the legal form of the company, must meet complex documentation requirements and follow local procedures. Understanding local regulations, language and culture is essential for successful registration and obtaining a local VAT number or activating an EU VAT number, depending on the type of registration.

Few companies have the in-house expertise to handle foreign VAT registrations and settlements. Choosing EFF is a natural step to avoid problems and unnecessary costs when it comes to VAT compliance.

International VAT registration can apply to companies that:

• sell goods or services over the Internet to individuals and institutional entities
• have or intend to open warehouses in other countries
• dispatch goods to private consumers from local warehouses or distribution centres
• ship machines to various countries (with installation services)
• sell tickets for conferences
• provide real estate services

It’s worth mentioning that once a company is successfully registered for VAT, it is legally obliged to submit recurring VAT returns to the local tax office.

When VAT registration abroad becomes mandatory

VAT registration does not depend on where your company is established, but on where the tax point arises. The most common triggers are:

• storing goods in another country, including fulfilment centres and marketplace warehouses,
• selling goods to local customers from a warehouse located in that country,
• exceeding the EU-wide threshold of EUR 10,000 in distance sales to consumers, unless you use the OSS scheme,
• supplying services taxed where they are performed, such as construction and installation work,
• organising events, trade fairs or conferences with paid admission.

An EU VAT number does not always replace a local VAT registration. While it allows a business to be identified for intra-Community transactions, it is not sufficient when the company carries out taxable activities locally in another country, such as selling goods from a warehouse located in that country.

Local registration or the OSS scheme

If you sell to consumers in several EU countries, you have two options. The OSS scheme lets you report all EU VAT in a single return filed in one Member State, without registering separately in each country. Local registration remains necessary whenever the goods are already located in the country of sale.

In practice both solutions often run in parallel: OSS covers shipments from a central location, while local registrations cover the countries where stock is held.

How the registration process works

Every country has its own procedure, but the sequence is broadly similar:

• determining in which country and from which date the registration obligation arises,
• collecting corporate documents together with sworn translations where local rules require them,
• submission of an application to the relevant tax authority, in some countries through an authorised representative, and in certain cases through a tax representative, particularly for businesses established outside the European Union
• obtaining the VAT number and confirming the filing frequency,
• starting to report in the local format and within local deadlines.

Processing times vary considerably between countries and depend on how complete the documentation is. Build this lead time into your commercial plans, because the tax obligation arises whether or not the number has already been issued.

Consequences of late registration

Retroactive registration is possible in most countries, but expensive. Tax authorities then expect all outstanding returns for the entire period of the obligation, together with the tax due and interest. Penalties for late notification follow, and sellers using online marketplaces also risk having their seller account suspended.

For this reason, it is advisable to complete the VAT registration before carrying out activities that trigger a registration obligation, such as selling goods from a local warehouse or exceeding the B2C distance sales threshold where the business does not use the VAT OSS scheme.

Deregistration from VAT in EU countries

If a VAT-registered company in an EU country ceases to conduct EU transactions or changes its sales model, the entrepreneur is obliged to notify the local Tax Office, which, after analyzing the documentation and tax settlements, may decide to deregister the entity from the national active business register. Such a scenario can take place at the request of the entrepreneur, but also at the initiative of the local Tax Office, if the institution notes a long-term lack of sales and any other activity, or in the case of persistent non-compliance with tax law, including payment of VAT financial obligations. Some EU countries have a minimum period for remaining an active VAT taxpayer after successful registration, which is why in some scenarios we recommend our clients to submit zero-rated VAT returns – NIL – until this period expires. Naturally, the deregistration process will not be completed if the Tax Authority has doubts about previous tax returns, is awaiting payment of outstanding VAT, or a tax audit is underway. The process can be convoluted, especially due to cultural differences and language barriers, which is why, as Duni EFF, we support our clients through the process, with a particular focus on advising if and when deregistration will be most effective.