Monthly Archives: April 2016

European Union VAT Rules for Small and Medium Enterprises

Starting 1st January 2015, new VAT rules applied to all businesses in the European Union. This caused quite a stirr among small companies, notably small software companies and many companies in niche markets.

The idea was that it would be more transparent to consumers if they would always pay the sales tax rate applicable in their own country. Also, it seems to be justifiable to have VAT flow back to the country of origin by charging companies separately in each country where they generate revenues. Hence, European enterpreneurs would have to pay sales tax in every European country where they do business. Many owners of small European enterprises considered registering for and paying VAT in 28 different countries unrealistic. So did Economy-x-Talk and many small software companies. A few of our colleagues even decided to quit business.

Unfortunately, the rules were not widely published in every country –although available in official law publications– and caused quite some uncertainty during the first few months of 2015. All panic appeared to be unnecessary however. If, like Economy-x-Talk, you get your revenues from almost every country in Europe as well as many countries outside Europe, chances are that you will never have to worry about the admnistrative mess caused by the new EU sales tax rules.

As a software developer, I deliver
– electronic products such as apps and on-line services
– services such as consulting and software development
– other products such as books

What are the relevant rules?

1) If you do business in your own country only, you don´t need to worry about the new EU rules.

2) If you deliver electronic products such as apps and on-line services (e.g. streaming services) and telecom services, you can register for MOSS, which allows you to pay VAT in your own country and charge your customers the VAT rate of your own country, but this only applies to aforementioned services and not to other products and services that you may offer.

3) If you deliver to customers who have their own VAT number, you can shift VAT to those customers and they will pay the VAT in their own country, taking away the need to register for VAT in their country.

4) If you (also) deliver to customers without VAT number, whether or not you need to register for VAT in their countries depends on the amount of your revenues in those countries. If your revenues are less than the threshold value for VAT registration, then you don´t need to register and you can charge your foreign customers your domestic VAT rate and pay to the domestic TAX authority.

5) If your company doesn’t exceed the threshold values, you may have an obligation to pay to the national tax authority! You may still be able to ignore the threshold values and always charge foreign tax rates, but you may need to ask permission from your tax office before you can do so.
The threshold values follow below.

All small companies that consider registering for VAT in multiple countries as too complicated, are probably too small to exceed the threshold values. Larger companies can afford to hire an accountant who takes care of these matters.

If you have a small company, don’t worry about international VAT schemes. Just charge your customers the local VAT rate and pay to your own national VAT authority only.
By the end of the year 2015, the threshold values for the countries of the EU are the following.

Country         Currency   Threshold Value
Belgium         EUR        35 000
Bulgaria        BGN        70 000
Cypre           EUR        35 000
Danmark         DKK        280 000
Germany         EUR        100 000
Estonia         EUR        35 151
Finland         EUR        35 000
France          EUR        100 000
Greece          EUR        35 000
Hungary         HUF        8 800 000
Ireland         EUR        35 000
Italy           EUR        35 000
Croatia         HRK        263 000
Latvia          EUR        35 000
Lithuania       EUR        35 000
Luxembourg      EUR        100 000
Malta           EUR        35 000
Austria         EUR        35 000
Poland          PLN        160 000
Portugal        EUR        35 000
Romania         RON        118 000
Slovenia        EUR        35 000
Slowakia        EUR        35 000
Spain           EUR        35 000
Czech           CZK        1 140 000
United Kingdom  GBP        70 000
Sweden          SEK        320 000

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