ArticleField.comInternet's Fastest Growing Free Content Article Directory

As the fledgling European Coal and Steel Community of the early 1950’s matured into the current EU, member countries individually abandoned a complex mix of sales and use taxes in favor of one common EU-wide tax scheme. The recently implemented EU VAT package simplifies and modernizes the EU VAT legislation. The age old debate of which EU country is entitled to VAT on a particular service ends with these new rules, eliminating double taxation risk for companies operating in The EU. The EU VAT rules eliminate the double taxation risk for companies operating in the EU, and don’t have to be the main aspect that decides an entity setup. The low VAT jurisdictions are unnecessary as the services are taxed in the country of consumption.

The VAT package does not necessarily have the same treatment in non EU countries, located in Europe.

The VAT rates vary widely in the European Union. They can dip as low as 15 percent in Luxembourg and run as high as 25 percent in Denmark and Sweden – rates that are nothing like the 5 percent to 8 percent sales tax rates that American consumers pay.

In Switzerland, taxable persons registered in the country for VAT purposes are required to submit a revised VAT declaration form, which provides the Swiss tax authorities with more detailed information.

1. Income from supplies of goods or services abroad should be reported separately.
2. Income relating to compensation for damages, dividends and donations also needs to be reported

Changes in Compliance
All service providers are now required to periodically submit EC Sales Listings where services are provided to customers that are liable to report VAT under the reverse charge mechanism. Such listings are required to be filed monthly. In some countries this may be on a quarterly basis.

Simplified Refund Procedures For Cross Border VAT
The package specifies simplified rules for obtaining cross border EU VAT refunds.

1. If a taxable person needs to obtain an EU VAT refund from a country where he/she is not established, the person can file an electronic return in the country where he is established.
2. The rules prescribe strict time limits for response and refunds.
3. The rules also provide for interest in cases of delay in refunds.

Use and Enjoyment Rules
In an Company international expansion, under the new EU VAT package, member states can prescribe Use and Enjoyment rule for services delivered to non-EU countries. These rules would result in charging of local VAT on services delivered to a non-EU country, if the effective “use and enjoyment” of the service takes place in the EU country.

European VAT laws are riddled with exceptions and not all EU countries have the same regulations and interpretations of the EU regulations. Many of these exceptions and regulations apply to small businesses and sole persons. It is best to check with your accountant, the tax authorities, the chamber of commerce or better still, have the help of an expert who can guide you about any exceptions or exemptions which may be applicable to your international expansion.