Local businesses – defined as having an established entity in a country – must register for VAT if they breach the revenue threshold prescribed by the local tax authorities. This means that most businesses in a VAT regime will immediately (or eventually) need to be VAT registered in their home country.
Many countries around the world (including all countries in the European Union), allow non-resident VAT registration. This means that businesses who are not established in the country and who don’t have any presence locally (premises, employees, bank accounts etc.) are expected to register for VAT despite being ‘non-resident’.
Businesses who provide goods or services in a foreign jurisdiction with a VAT regime that allows non-resident registration must comply with the relevant VAT laws of that country. There are several cases where it will be a legal obligation for a company to register for VAT because they are undertaking taxable business activity.
Such activity includes:
- Importing goods into the country for sale or distribution.
- Buying and selling goods locally.
- Selling goods to individuals over the internet (revenue thresholds may apply).
- Storing goods in a warehouse, as consignment stock or in a fulfilment centre.
- Organising an event in the country (specifically if there is paid admission to the event).
- Offering services online to consumers in that country (including software, apps and streaming).
It is the company’s responsibility to register for VAT prior to commencing taxable transactions and once registered, one must comply with the compliance and reporting requirements.
In most instances, the non-resident business must appoint a tax agent or fiscal representative in order to obtain the VAT number, but there are no other tax, compliance or logistical implications of registering as a non-resident.