If you have a business established in the European Union (EU) and you engage in sales transactions with a business located in another Member State, then you are subject to intra-Community VAT. Though, the understanding of this VAT escapes very often to many companies. Since that its operating rules are quite complex to the point of losing many businesses.
But, what is intra-community VAT? What can be the obligations of companies towards it? And if necessary how to be represented? The answers to these questions will shed light on the subject of intra-community VAT.
Intra-community VAT is a value-added tax that applies to trade between European Union countries. This tax was set up to promote and make easier sales transactions between companies operating in the European Union. Clearly, each of these companies has a standardized VAT number. In France, for example, this number is preceded by FR, a two-digit code, and the SIRET number. Each entity can obtain it free of charge from the tax authorities.
Indeed, any purchase made by a French company established in France from a company located in a Member State of the European Union constitutes an intra-Community acquisition. The French company in this case is liable for French VAT if the place of delivery is located in France. Thus, every 15 days following delivery, VAT may be required.
Intra-community VAT may be applied in this transaction on the assumption that the invoicing rules are strictly respected. It is a question of mentioning the identification number of the buyer, but also of the seller, the price excluding VAT… It is also a question of indicating the deductible VAT and the VAT collected at the level of the CA3 declaration.
In addition, for all transactions carried out in the acquisition or delivery of goods in the territory of the European Union, an Intrastat declaration is required. This declaration must be completed each month and sent to the customs services around the 10th of the month to which the VAT applies.
Obligations of a company towards intra-community VAT
How to be represented?
Companies are subject to some obligations in terms of intra-community VAT. These obligations are manifested through three declarations, which depend on the nature of the transaction: for goods, the old declaration of exchange of goods (DEB) is split into two distinct obligations which are the monthly statistical survey on intra-union exchanges (EMEBI) and the summary statement. For services the declaration of exchange of services (DES).
The monthly statistical survey on intra-Union trade (EMEBI)
The EMEBI (former DEB) is done monthly, it is the work of entities whose activity extends to the exchange of goods with other companies established in the European Union. Whether for intra-Community deliveries or acquisitions of goods, companies have up to 10 days after the exchange to transmit the EMEBI to the customs service. However, EMEBIs are made according to the amount of transactions carried out during the calendar year:
• With less than 460,000 euros in annual transactions, companies are exempt from Intrastat.
• For more than 460,000 euros of transactions carried out during the year, companies must submit declarations on introduction and/or dispatch.
It should be noted that the EMEBI must imperatively indicate all the exchange operations of community goods, between France and another EU country. Whether is it in acquisition or delivery, the company is required to specify the details of the transaction.
It should also be noted that the EMEBI can only declare itself if the company has received a notice letter from the French administration, informing them that they must proceed with its declaration.
The summary statement must be completed for two types of operations: Firstly for intra-community deliveries (LIC) as well as for stock transfers. For these operations, the summary statement is mandatory from the 1st euro.
The summary statement must be filed between the 1st and 10th working day of the month following the month of operations.
European services declaration (DES)
The European services declaration is carried out by a company which offers services for another one from a country located in the EU. As with goods, some companies provide services for companies from another State located in the European Union. They are therefore forced to provide a DES to the customs service from the 1st euro of service.
In this declaration, we must find listed all the customers for whom the services were intended, a bit like the old DEB. There are templates available on the Customs website. The DES must also be returned on the 10th day following the month when the service was provided and for which VAT is payable.
How to be represented?
It should be noted that companies outside the EU that carry out taxable transactions with other companies in the EU are required to appoint a tax representative in the country where they operate. It’s the example of companies located in European States that do not belong to the European Union (Switzerland, etc.), but also in countries outside the European Union such as (USA, China, etc.).
On the other hand, when an EU company foresees taxable transactions with another one in an EU country, it is advisable to hire a tax agent. The latter must therefore carry out administrative formalities concerning intra-community VAT (intra-community VAT number, VAT declaration, etc.). The company can call on the services of a company specialized in tax representation. Its role will be:
• Analyze and secure flows (verification of invoicing flows and tax documents),
• proceed with VAT registration (obtain an intra-community VAT number),
• to carry out VAT and EMEBI declarations,
• dealing with communications with the local tax administration.
Understanding the functioning of intra-community VAT requires an expertise. Clearly, intra-community VAT is a value-added tax that applies to all sales transactions between companies from different member countries of the European Union. These transactions can be acquisitions, deliveries or exchange of services.
To be in compliance for this taxable exchanges, some declarations are mandatory: the EMEBI, the summary statement and the DES in particular. Finally, if this mechanism escapes you, you can be represented by a specialized company, which will accompany you and assist you in all your tax administrative procedures like Eurotax. Do not hesitate to contact us or visit our page.