European Union Value Added Tax Area
Encyclopedia
The European Union value added tax area is a territory consisting of all European Union member states and certain other countries which follow the European Union's (EU) rules on value added tax
(VAT). The principle is also valid for some special taxes on products like alcohol and tobacco.
Goods are only considered as imported or exported if they enter or leave the area. The VAT percentage does, however, differ from country to country within the area, which is a complicating factor, especially when, for example, an Internet-based reseller in one EU country sells to an EU customer in a different EU country.
When goods or services are sold to a company across a border within the area, either the buyer pays the sales country's VAT to the seller, or it is possible to register the transaction as an inter-company sale with no VAT being collected. If VAT has been paid the buyer cannot include it in their VAT accounts like VAT paid locally.
When goods or services are sold (and sent) to a private person across a border within the area, the buyer usually pays the sales country's VAT to the seller, and does not pay any VAT in the buyer's country. But if the seller's annual sales of goods to the buyer's country exceed a threshold (which varies by country), the seller must instead charge VAT in the buyer's country. These are known as the distance selling rules. When a private person visits another EU country and buys goods, the seller does not have to take special action, just claim the local VAT, and the buyer can bring it home for personal use or gifts without limits.
EU sellers may validate the VAT number of a buyer residing within the EU Value Added Tax Area using VIES
.
Reasons:
European Union Value Added Tax
The European Union value added tax is the system of value added tax adopted by nations in the EU VAT area. The European Union itself does not collect the tax, but EU member states are each required to adopt a VAT that complies with the EU VAT system...
(VAT). The principle is also valid for some special taxes on products like alcohol and tobacco.
Goods are only considered as imported or exported if they enter or leave the area. The VAT percentage does, however, differ from country to country within the area, which is a complicating factor, especially when, for example, an Internet-based reseller in one EU country sells to an EU customer in a different EU country.
When goods or services are sold to a company across a border within the area, either the buyer pays the sales country's VAT to the seller, or it is possible to register the transaction as an inter-company sale with no VAT being collected. If VAT has been paid the buyer cannot include it in their VAT accounts like VAT paid locally.
When goods or services are sold (and sent) to a private person across a border within the area, the buyer usually pays the sales country's VAT to the seller, and does not pay any VAT in the buyer's country. But if the seller's annual sales of goods to the buyer's country exceed a threshold (which varies by country), the seller must instead charge VAT in the buyer's country. These are known as the distance selling rules. When a private person visits another EU country and buys goods, the seller does not have to take special action, just claim the local VAT, and the buyer can bring it home for personal use or gifts without limits.
EU sellers may validate the VAT number of a buyer residing within the EU Value Added Tax Area using VIES
VAT Information Exchange System
VAT Information Exchange System is an electronic means of transmitting information relating to VAT-registration of companies registered in EU. The European Union requires that when goods or services are procured within the EU, VAT has to be paid only in the member state where the purchaser resides...
.
Included areas
- All EU countries except most non-European areas (see below)
- Akrotiri and DhekeliaAkrotiri and DhekeliaThe Sovereign Base Areas of Akrotiri and Dhekelia are two British-administered areas comprising a British Overseas Territory on the island of Cyprus administered as Sovereign Base Areas of the United Kingdom...
(included with CyprusCyprusCyprus , officially the Republic of Cyprus , is a Eurasian island country, member of the European Union, in the Eastern Mediterranean, east of Greece, south of Turkey, west of Syria and north of Egypt. It is the third largest island in the Mediterranean Sea.The earliest known human activity on the...
) - AzoresAzoresThe Archipelago of the Azores is composed of nine volcanic islands situated in the middle of the North Atlantic Ocean, and is located about west from Lisbon and about east from the east coast of North America. The islands, and their economic exclusion zone, form the Autonomous Region of the...
& MadeiraMadeiraMadeira is a Portuguese archipelago that lies between and , just under 400 km north of Tenerife, Canary Islands, in the north Atlantic Ocean and an outermost region of the European Union...
(included with PortugalPortugalPortugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
) - Isle of ManIsle of ManThe Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...
(included with the United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
) - MonacoMonacoMonaco , officially the Principality of Monaco , is a sovereign city state on the French Riviera. It is bordered on three sides by its neighbour, France, and its centre is about from Italy. Its area is with a population of 35,986 as of 2011 and is the most densely populated country in the...
(included with FranceFranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
& charges the same rate of 19.6%)
Excluded areas
- not included in DenmarkDenmarkDenmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
:- Faroe IslandsFaroe IslandsThe Faroe Islands are an island group situated between the Norwegian Sea and the North Atlantic Ocean, approximately halfway between Scotland and Iceland. The Faroe Islands are a self-governing territory within the Kingdom of Denmark, along with Denmark proper and Greenland...
1 - GreenlandGreenlandGreenland is an autonomous country within the Kingdom of Denmark, located between the Arctic and Atlantic Oceans, east of the Canadian Arctic Archipelago. Though physiographically a part of the continent of North America, Greenland has been politically and culturally associated with Europe for...
1
- Faroe Islands
- not included in FinlandFinlandFinland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
:- ÅlandÅland IslandsThe Åland Islands form an archipelago in the Baltic Sea. They are situated at the entrance to the Gulf of Bothnia and form an autonomous, demilitarised, monolingually Swedish-speaking region of Finland...
2
- Åland
- not included in France:
- Overseas departmentOverseas departments and territories of FranceThe French Overseas Departments and Territories consist broadly of French-administered territories outside of the European continent. These territories have varying legal status and different levels of autonomy, although all have representation in the Parliament of France , and consequently the...
s, such as RéunionRéunionRéunion is a French island with a population of about 800,000 located in the Indian Ocean, east of Madagascar, about south west of Mauritius, the nearest island.Administratively, Réunion is one of the overseas departments of France...
and GuadeloupeGuadeloupeGuadeloupe is an archipelago located in the Leeward Islands, in the Lesser Antilles, with a land area of 1,628 square kilometres and a population of 400,000. It is the first overseas region of France, consisting of a single overseas department. As with the other overseas departments, Guadeloupe...
2 - Overseas collectivities 1
- Overseas department
- not included in GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
:- Büsingen am Hochrhein 2
- HeligolandHeligolandHeligoland is a small German archipelago in the North Sea.Formerly Danish and British possessions, the islands are located in the Heligoland Bight in the south-eastern corner of the North Sea...
2
- not included in GreeceGreeceGreece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
:- Mount AthosMount AthosMount Athos is a mountain and peninsula in Macedonia, Greece. A World Heritage Site, it is home to 20 Eastern Orthodox monasteries and forms a self-governed monastic state within the sovereignty of the Hellenic Republic. Spiritually, Mount Athos comes under the direct jurisdiction of the...
2
- Mount Athos
- not included in ItalyItalyItaly , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
: some parts bordering to Switzerland- Campione d'ItaliaCampione d'ItaliaCampione d'Italia is an Italian comune of the Province of Como in the Lombardy region, occupying an enclave within the Swiss canton of Ticino, separated from the rest of Italy by Lake Lugano and mountains...
2 - LivignoLivignoLivigno is a town and comune in the province of Sondrio, in the region of Lombardy, Italy, located in the Italian Alps.- Geography :Livigno is located 1,816 metres above sea level. Livigno's main river is called Aqua Granda or Spöl. Trepalle, a frazione in the municipality of Livigno, is...
2 - The Italian waters of Lake LuganoLake LuganoLake Lugano is a glacial lake in the south-east of Switzerland, at the border between Switzerland and Italy. The lake, named after the city of Lugano, is situated between Lake Como and Lago Maggiore...
2
- Campione d'Italia
- not included in NetherlandsNetherlandsThe Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
:- ArubaArubaAruba is a 33 km-long island of the Lesser Antilles in the southern Caribbean Sea, located 27 km north of the coast of Venezuela and 130 km east of Guajira Peninsula...
1 - CuraçaoCuraçaoCuraçao is an island in the southern Caribbean Sea, off the Venezuelan coast. The Country of Curaçao , which includes the main island plus the small, uninhabited island of Klein Curaçao , is a constituent country of the Kingdom of the Netherlands...
1 - Sint Maarten 1
- The Caribbean Netherlands 1
- Aruba
- not included in SpainSpainSpain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
:- Canary IslandsCanary IslandsThe Canary Islands , also known as the Canaries , is a Spanish archipelago located just off the northwest coast of mainland Africa, 100 km west of the border between Morocco and the Western Sahara. The Canaries are a Spanish autonomous community and an outermost region of the European Union...
2 - CeutaCeutaCeuta is an autonomous city of Spain and an exclave located on the north coast of North Africa surrounded by Morocco. Separated from the Iberian peninsula by the Strait of Gibraltar, Ceuta lies on the border of the Mediterranean Sea and the Atlantic Ocean. Ceuta along with the other Spanish...
2 - MelillaMelillaMelilla is a autonomous city of Spain and an exclave on the north coast of Morocco. Melilla, along with the Spanish exclave Ceuta, is one of the two Spanish territories located in mainland Africa...
2
- Canary Islands
- not included in United Kingdom:
- GibraltarGibraltarGibraltar is a British overseas territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. A peninsula with an area of , it has a northern border with Andalusia, Spain. The Rock of Gibraltar is the major landmark of the region...
3 - Channel IslandsChannel IslandsThe Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...
2 - British Overseas TerritoriesBritish overseas territoriesThe British Overseas Territories are fourteen territories of the United Kingdom which, although they do not form part of the United Kingdom itself, fall under its jurisdiction. They are remnants of the British Empire that have not acquired independence or have voted to remain British territories...
1
- Gibraltar
Reasons:
- Not part of the EU as overseas countries and territories.
- Areas excluded from VAT area by Article 6 of Council Directive 2006/112/EC of 28 November 2006 (as amended) on the common system of value added tax (OJ L 347, 11.12.2006, p. 1).
- Excluded by Article 28 of the Act concerning the conditions of Accession and the Adjustments to the Treaties (22 January 1972).
Areas with special rules
- SwedenSwedenSweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
does not want to accept the VAT union regarding alcohol (see SystembolagetSystembolagetSystembolaget is a government owned chain of liquor stores in Sweden. It is the only retail store allowed to sell alcoholic beverages that contain more than 3.5% alcohol. Systembolaget also sells non-alcoholic beverages. To buy alcoholic beverages at Systembolaget one has to be 20 years of age or...
) and tobacco shipped to private persons. Sweden has had a law forbidding such trade, but a court has interpreted the EU law so that it must be allowed. Still Swedish alcohol or tobacco tax have to be paid even if the sales country's tax has been paid or else the goods may be confiscated by the Swedish customs. These taxes must be paid in full to the Swedish tax authority before the goods are sent. A form has to be posted to the tax authority before the goods are sent and a different form has to be posted to the tax authority within five days after the goods have arrived. The posting of the forms and paying of the taxes is handled by the party (buyer or seller) who is responsible for the transportation of the goods. The first form has a mandatory field where you have to fill in a parcel identification number which may cause problems if the shipping option used doesn't use parcel identification numbers. The second form exists in two variants, one for tobacco tax and one for alcohol tax, and you need to submit both forms if you need to pay both kinds of tax. The first form only exists in one variant where both taxes are specified.http://www.skatteverket.se/privat/blanketterbroschyrer/broschyrer/info/540.4.233f91f71260075abe8800072519.htmlhttp://www.skatteverket.se/foretagorganisationer/blanketterbroschyrer/blanketter/info/5386.4.6efe6285127ab4f1d2580004718.html?posid=1&sv.search.query.allwords=skv Since 2003, alcohol and tobacco for personal use can be brought into Sweden without a specific limit when travelling.
See also
- Special member state territories and the European Union
- VAT identification number