Treatment of E-commerce VAT This article describes the VAT treatment and VAT obligations of companies...
home / When do you need an EU VAT number? VAT registration requirements in Europe
Every company extending their activity abroad must consider the need for a VAT registration. Even when the business is not setting up a branch or having any physical presence in the country, a VAT registration may be required.
As a general rule, you need to register for VAT in a country when you are performing taxable transactions in that territory. There are special VAT rules for e-commerce businesses which you can read in our article VAT on drop-shipping. E-commerce VAT. For every other business without a permanent establishment, these are some of the transactions that will oblige you to register for VAT in a country:
Transactions that do not (usually) oblige you to get a VAT number
For the avoidance of doubt, the below transactions do not normally require a non-established company to get a VAT number. As it often happens with VAT, there are exceptions to the rule.
If you are incurring VAT, recovering these amounts have different procedures depending on whether you are VAT registered or not. We explain the difference in EU VAT Refund. Recover VAT through the VAT return or separate refund claims?.
A few examples
A company buys goods in Poland and moves them to a processing plant in Germany. This company will need to get a VAT number in Poland due to the movement of these goods to another Member State (intra-Community suply). This same movement will require a VAT number in Germany (intra-Community acquisition). Although this is not a sale and the title of the goods remains within the same company, the transfer of goods between member states follows the same VAT rules as the sale of goods.
Let´s take now the example of a UK company leasing automotive machinery to a client in France. The machinery is purchased from a local French supplier and placed in the premises of the final customer, also French. Purchases of goods do not require a VAT registration. Leasing is a B2B service that is reverse charged by the customer and doesnot require a VAT registration neither. The leasing business will not be allowed to get a French VAT number. Regarding the VAT incurred on the domestic purchase, this will be recovered through the VAT Refund Directive.
And what about registration thresholds? If you are a foreign company not established in a country, registration thresholds do not apply. These thresholds are only applicable to small established businesses. Non-established companies need to register as soon as they make the first taxable transaction.
On top of this, you need to consider all the administrative obligations such as invoicing, bookkeeping, return preparation and ERP requirements. Feel free to contact us if you need any help with your VAT registrations or VAT obligations in any European country.