For companies providing goods or services in foreign European countries, there may be a requirement to VAT register as a non-resident VAT trader. Many countries permit the foreign company to register ‘directly’ with the tax office, without having to appoint a local representative.
However, under certain circumstances, the tax authorities will requires the company to appoint a Fiscal Representative in the destination country. This company must be tax registered and willing to act as the local representative of the company, managing with queries and filing obligations of the company for dealings with the tax authorities.
In some cases, the fiscal representative may be jointly liable for all VAT payments of the company.
The tax authorities regard a fiscal representative as the local agent of the foreign trader – which leads to several compliance obligations. Additionally, since the fiscal rep is jointly liable for the trader’s taxes, it is industry practice to require a security deposit or bank guarantee in favour of the Fiscal Representative to mitigate against potential risks if the company reneges of any liabilities.