If you’re opening a business in or expanding to the European Union, you may not be aware of your obligations when it comes to value added tax (VAT). Because of the open trade between EU countries, the obligation to pay this goods tax often falls on the exporter, as opposed to customs. Changes to the rules on digital services within the past few years have complicated matter somewhat - and a new set of rules on cross-border trade is on the way.
The new rules and guidelines are designed to favour EU businesses by altering thresholds, as well as clamping down on non-EU businesses avoiding tax. To get to grips with the current and upcoming legislation, here’s a brief guide to your obligations from 2018 onwards as an EU seller, and the best ways to pay tax on cross-border and global transactions.
Current cross-border VAT rules
At present, EU businesses selling to other EU businesses do not need to worry about VAT - so long as the other business has a valid VAT number. The business receiving the goods must account for the VAT as if it was selling them, at the rate of VAT local to that business.