In this article, we’ll talk about VAT registration in the EU. What are the required steps for getting a VAT number in Germany, Hungary, the Czech Republic, Poland, and Estonia?
What is VAT?
The abbreviation VAT stands for Value Added Tax. VAT is usually payable by companies to the state but is passed on to the consumer when buying products.
What's VAT Used For in the EU?
VAT comes into use by selling and buying goods and services in the territory of the EU. It allows exports in the EU for zero-tax. When it comes to non-EU territories there is a tax price for imports from EU to non-EU areas and vice versa. This leads to competition between companies. There are several circumstances in which corporations or natural people must register for an EU VAT number, and it is critical to understand them to properly comply with local regulations.
Who Needs To Register For VAT In The EU?
There are several circumstances in which corporations or natural people must register for an EU VAT number. Full details on VAT obligations for various sorts of products and services in the EU may be found here. Here are a few instances of enterprises (both EU and non-EU) that require VAT registration.
• Every firm in the European Union has a taxable revenue that exceeds the yearly VAT threshold. This criterion varies from nation to country. Information about the countries we give services to will be listed down.
• Importers of products into the European Union’s territory.
• Traders that sell digital items into the European Union’s jurisdiction.
• Traders who provide taxable products or services.
• Traders who arrange paid conferences, seminars, exhibits, or forums.
• Traders selling their wares via the internet.
The Registration of VAT in The EU
The registration of VAT varies by country, and it depends on their law. Each country has its VAT number with the beginning of its Code, for example for Germany it would be GER plus the 8–10-digit number. The VAT format guidelines per nation are accessible on the Your Europe website.
VAT Registration in Germany
To apply for the VAT number or the tax identification number, you should contact the Federal Central Tax Office in Germany. The application is free of charge. You can also apply for the tax ID number online. To do this, you must enter the tax number. The tax number should not be confused with the tax ID. However, several significant exceptions are compounded by member states’ uneven interpretation of the standards. Though one of these exclusions applies, a foreign firm must register for VAT in Germany, even if it has no branch or place of business there. The tax office divides VAT numbers into two categories: one for reporting VAT files and general correspondence, and the other for identifying firms doing EU cross-border transactions (intra-community supplies). The German VAT code begins with GER123456789. If you are not sure that there is a need for you, you can contact us.
VAT Rates in Germany
In Germany, the typical VAT rate is 19%. Food, literature, hotel accommodations, cultural services, and other products and services are taxed at a reduced rate of 7%. Transportation inside the community and internationally is taxed at 0%.
VAT returns in Germany
ICompanies having a German VAT number are required to submit periodic returns documenting all taxable supply (sales) and inputs (costs). In Germany, VAT returns are often submitted monthly. VAT returns in Germany are due on the tenth of the month after the reporting period. German returns are electronically filed with the appropriate Finanzamt using the ELSTER system (tax office). In addition, a yearly German VAT return must be submitted by the end of May of the following year.
VAT Registration in Hungary
In Hungary, a foreign firm must register for all taxes, not only VAT. The Hungarian VAT number begins with the country code HU12345678. The Hungarian tax office will require the following paperwork to be supplied with the relevant registration forms:
• A copy of a VAT certificate (in Hungarian) to demonstrate that the company is VAT registered elsewhere in the EU, if applicable.
• a copy of the company’s national trade registration (in Hungarian).
• A declaration (in Hungarian) describing the company’s economic activity.
• A genuine specimen signature from one of the company’s representatives.
• A durable power of attorney (if using a fiscal representative e.g. all non-EU businesses). Once a company has obtained its VAT number, it is allowed to begin trading and charging Hungarian VAT. It must follow Hungarian VAT regulations and make regular returns (see Hungarian VAT Returns briefing).
VAT Rates in Hungary
The standard VAT rate is 27%.
Some items are subject to a lower VAT rate of 18%. (e.g. certain milk, certain dairy products, products made from cereals, flour, and starch). The 18% VAT rate also applies to commercial accommodation services as well as services that provide entrance to musical and dance events. A 5% VAT reduction is available for new residential property, certain pharmaceutical products, audiobooks, printed books, newspapers, district heating services, certain live performance activities, animal sector products (e.g. live and processed large animals such as pig, sheep, goats, cattle, poultry, eggs), fresh milk, internet access services, local dining services (i.e. meals and non-alcoholic beverages prepared locally in bars and restaurants). The lower 5% VAT rate on the supply of new residential property will be in effect from 1 January 2021 to 31 December 2022. Given that some additional VAT Act conditions are met, the reduced rate will be applicable for a longer period (until 31 December 2026), assuming that the Building and Construction Authority issues a final confirmation until 31 December 2022, or the simplified registration procedure of the construction was initiated until 31 December 2022.
VAT Returns in Hungary
The default tax return time in Hungary is quarterly; however, beginning in 2015, all newly created firms must file monthly returns until the final day of the calendar year after the date of their creation. The regularity with which tax returns must be submitted after that is determined by the amount of VAT paid by the firm. If the net due VAT in the second year preceding the current tax year exceeds HUF 1 million, the return period for enterprises is monthly. This is also true if a company’s VAT liability surpasses HUF 1 million in any quarter of the current fiscal year. Small companies who do not have an EU VAT number and pay less than HUF250,000 in VAT per year may file yearly VAT returns.
VAT Registration in Poland
In Poland, it includes the prefix PL followed by 10 digits. For example, PL 1234567890. In Poland, the requirement to register for VAT can be triggered in a variety of ways. Here is a listofthemosttypicalscenarios:
• Importing products from non-EU nations into Poland.
• Purchasing and selling products in Poland (save for domestic reverse charge);
• Selling items from Poland to customers in other countries (business-to-business or business-to-consumer);
• Purchasing products from another EU nation in Poland (intra-community purchases);
• Inventory holding and storage in Poland for sale, distribution, or consignment.
• Distance Selling VAT registration thresholds apply to e-commerce sales of products to Polish customers.
• Organizing events in Poland when attendees or delegates pay a fee to attend.
All document copies must be translated into Polish by a professional translator and notarized.
VAT rates in Poland
In Poland, the typical VAT rate is 23%. Certain foods, books, newspapers, and a limited number of other services have reduced rates of 8% and 5%, respectively. Financial and postal services, for example, are free from Polish VAT.
VAT Returns in Poland
Monthly or quarterly VAT returns in Poland are due on the 25th of the month after the end of the period. Any applicable Polish VAT must be paid at the same time. If a company has chosen to submit quarterly reports but is obliged to make monthly prepayments, the VAT payable for the quarter should be paid as follows: Obligatory prepayment of one-third of the VAT paid in the previous quarter in the first two months of the quarter. The third month’s VAT is computed using the VAT return for that quarter.
VAT Registration in The Czech Republic
The Czech VAT number begins with CZ+ 8/9/10 digit numbers. The Czech tax office will require the following forms to be filled out and submitted together with the accompanying documentation:
• If applicable, a VAT certificate proving that the firm is VAT registered elsewhere in the EU.
• Permission to perform in economic activity.
• A copy of the company’s national trade registry.
Even if its turnover does not exceed the threshold, a firm can register as a VAT payer voluntarily if it renders or intends to render taxable or VAT exempt supplies on credit in the Czech Republic. Under certain conditions, firms that are not registered for VAT but have VAT obligations because of acquired goods or services become VAT-identified entities. A VAT-registered person only pays VAT on received supplies and is not eligible to recoup associated input VAT in its VAT return.
VAT Rates in The Czech Republic
On deliveries of goods and services inside the Czech Republic, VAT is typically imposed at a rate of 21%. Certain supplies (for example, foodstuffs and building work connected to social housing) are taxed at a rate of 15%, with a second reduced rate of 10% applied to certain types of items (some medicaments, books, newspapers, and also supply of heat and cold).
From 1 May 2020, the second lower VAT rate of 10% will also apply to drinking tap water, catering services, soft drinks and draft beer, shoe and garment repairs, hairdresser services, e-books, and other similar items.
Furthermore, beginning of 1 July 2020, the second lower VAT rate of 10% applies to hotel accommodations as well as entrance to cultural, sporting, or theatrical institutions.
Exports are typically free from VAT if they are accompanied by a credit. Some goods are excluded from the credit, such as real estate leasing (with some restrictions), banking and insurance services, education, health, and welfare.
VAT Returns in The Czech Republic
Within 25 days of the end of the taxable period, the VAT return must be filed and the tax paid. A calendar month is a taxable period (or calendar quarter under certain circumstances). All VAT payers registered in the Czech Republic are required to produce a report, known as a ‘control statement.’ VAT payers must provide full evidence of data from issued and received invoices in the control statement so that the Czech Financial Administration can compare and check transactions with business partners. The control statement is not a replacement for a VAT return.
VAT Registration in Estonia
The beginning of the Estonian VAT number starts with EE and 9-digit numbers. The VAT registration threshold is zero for international enterprises dealing in Estonia that are VAT/GST/Tax registered in their home country. Businesses must register from the moment they make their first supply.
The threshold is €35,000 per year for enterprises (that are EU VAT-registered) selling goods via the internet to consumers in Estonia (distance selling).
The Estonian tax authority will ask that the required forms (application forms KR and R2) be filled out and submitted along with the accompanying documentation:
• VAT certificate proving that the company is VAT registered elsewhere in the EU (if appropriate)
• a copy of the company’s national trade registry
• Evidence indicating the company will make taxable supplies in Estonia.
• A copy of the fiscal representative’s contract (if appropriate)
• Controlling management’s identity card or passport
VAT Rates in Estonia
VAT is charged at a regular rate of 20%. Books, journals (with a few exclusions), hotel lodging services, and listed medications are taxed at a lower rate of 9%.
The VAT rate on products and certain services exported is 0%. (i.e. exempt with credit). Some services, such as health care, insurance, some financial activities, and securities trades, are exempt (i.e. exempt without credit).
Real estate transactions are normally exempt from VAT, although there are a few notable exceptions (e.g. transactions in new and significantly renovated buildings). If specific circumstances are met, taxpayers might choose to apply VAT on real estate transactions.
VAT registration is necessary if the taxable supplies of Estonian resident firms or a PE of a non-resident business in Estonia exceed EUR 40,000 in a calendar year. It is also possible to register voluntarily. Certain non-resident business transactions necessitate Estonian VAT registration with no threshold.
VAT Returns in Estonia
Companies that have an Estonian VAT number are required to file regular returns describing all taxable supplies (sales) and inputs (costs). In most cases, the returns are due once a month. VAT returns must be submitted by the 20th of the month following the reporting period. Estonian Intrastat and European Commission Sales Lists Companies in Estonia may be required to provide additional statistical information in addition to VAT returns. The Estonian Intrastat return is due on the 14th of the month following the reporting period, while the Estonian EC Sales list is due on the 20th of the month following the reporting period. If a foreign firm makes taxable deliveries in Estonia but is unable to obtain an Estonian VAT number, or merely incurs Estonian VAT on local goods or services, the VAT can be reclaimed via a VAT reclaim.
Gurcan Partners is a Foreign Economic Relations Board, Hungary Business Council, Association of German Chambers of Industry and Commerce, and International Chamber of Commerce member international law and consultancy firm.
All rights reserved. All rights of VAT Registration in the EU article belong to Gurcan Partners. The author has no responsibility for the information in this article. This article is prepared just to inform.
Simge Ayse Pala
Gurcan Partners Düsseldorf Office