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Many businesses trade with customers and suppliers in other EU Member States. Such transactions are subject to a complex framework of rules that are designed to deliver certainty and a level playing field. In particular, these rules decide which country is entitled to VAT as otherwise disagreements between tax authorities would arise, as would the risk of “double taxation” or “no taxation”.
Trading with other EU Member States also brings requirements to complete and submit EU sales lists and the possibility that monthly statistical trade declarations will be required. It is also possible that businesses will be required to register for VAT in a number of territories.
It is fair to say that when dealt with correctly the majority of ‘business to business’ intra EU transactions can be made “VAT neutral”. That is suppliers can avoid charging VAT or registering for VAT elsewhere. However, when problems arise the risks are greater than with domestic transactions. Liabilities may be created in several different territories from a single transaction if procedures are not considered carefully and in advance. Changes to the treatment of intra EU supplies of services taking place on 1 January 2010 will increase reporting requirements as regards B2B transactions and will increase the risk of errors coming to the attention of the authorities.
Our knowledge of the EU law allows us to advise on how transactions should be structured so as to minimise compliance costs and the risk of avoidable VAT liabilities.
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