Modern trade requires increasingly sophisticated solutions. Many companies decide to conquer new markets outside their home country. An interesting possibility is to carry out transactions in different countries of the European Union. In this way, it is possible to increase the number of customers and therefore the company’s revenue. However, performing operations in multiple countries can be problematic. Fortunately, this problem has been recognized in the European Union and mechanisms have been implemented to simplify business operations. What should you pay attention to first?
Rules of the European Union trade
International trade can seem complicated. Many people are under the impression that it can bring both more revenue and new problems, including the settlement of EU VAT in different countries. Agreements have been made within the European Union to simplify trade and settlement of VAT between EU countries. This is expected to encourage businesses to take on new challenges. EU directives are aimed at unifying regulations and stabilizing the situation of entrepreneurs. The overall goal is to introduce universal rules for doing business throughout the European Union. However, it should be remembered that the law provides for the precedence of EU law over local law. This is beneficial for companies, as it reduces the need to familiarize oneself with changing tax laws in different countries.
Settlement of VAT by businesses
VAT is a consumption tax that is applied to the sale of goods and services almost all over the world. Its mode of operation is to eliminate the possibility of double taxation. Therefore, you should familiarize yourself with the concept of input VAT and output VAT. The former is the VAT charged at the stage of production and distribution of goods. Outstanding VAT, on the other hand, is calculated taking into account the goods or services that are paid by the ultimate recipient, i.e. the customer. VAT paid at previous stages of distribution is not paid again. It is accumulated, and is ultimately recovered in full from the final purchaser of the products. Therefore, it is usually the consumer who bears the cost of charging VAT.
Facilities for goods suppliers
EU member countries benefit from VAT, with tax rates ranging from 17% to 27%. European Union regulations set a minimum tax rate of 15%, in addition, reduced rates and a zero rate are possible. Therefore, running a business requires the effort of keeping track of the correct tax rates. A number of mechanisms have also been introduced to simplify the execution of transactions and settlements of VAT between EU countries. Among them, it is worth mentioning the VAT OSS and VAT IOSS systems. These make it possible to settle supplies of goods and services in different EU countries under a single EU VAT return in the country of identification, i.e. where the company has registered for VAT purposes. The simplifications also extend to imports of goods from non-EU countries.
Given the complicated nature of intra-EU trade, it is worthwhile to use the services of specialized consulting firms such as INTERTAX. Detailed information on available services can be found on the website at https://polishtax.com/vat-between-eu-countries/. This makes conducting trade in the European Union more stable and transparent, which is important especially for young companies that are just entering the market or are planning to expand trade beyond the local market.
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