When should you register for VAT? In many cases, that’s not a difficult question to answer. Registering for VAT will often be a legal requirement in the country in which you are doing business. Most obviously, if your annual trade exceeds the threshold set by your local tax authorities, you are legally obliged to register for VAT and file regular VAT returns. But what about instances in which you have the option to register for VAT in multiple countries? When are multiple VAT registrations advisable?
Registering for VAT is complex and involves ongoing compliance obligations. It is not always advisable to register for VAT where you are not obliged to do so. However, in several instances, the advantages will outweigh the disadvantages. Let’s consider a couple of scenarios.
Multiple VAT registration and e-commerce
If you sell goods online to customers in foreign countries, you could incur obligations to register for VAT in our or more jurisdiction.
Most commonly, if your sales exceed a specified threshold, you need to register for VAT. Depending on the value of your sales to each market, you potentially will need to register for VAT in every country to which you sell goods.
Now consider new rules introduced by the EU will make the process simpler for e-commerce retailers in Europe.
Using the One Stop Shop (OSS) mechanism, e-commerce sellers will no longer have to register in every country in which they exceed the distance sales threshold. Instead, they can elect to register for the OSS in one EU member state, and file a single, consolidated digital VAT return.
In this case, many companies will greatly benefit from the streamlined, simplified return.
Optimising import VAT
Now consider a company that exports large consignments of goods. The shipments are subject to considerable potential import VAT costs and customs duties.
The exporter generally has the option to pay the VAT and duties at the point of entry. However, many countries provide the option of deferring VAT payments and consolidating duties.
For example, a company that imports goods into the UK can take advantage of mechanisms such as Postponed Accounting and apply for a Duties Deferment Account. Such mechanisms provide a considerable cash flow benefit and streamline administrative requirements.
However, in order to take advantage of these mechanisms, you will have to register for UK VAT. The process is similar in other countries.
In these cases, the advantages of registering for VAT are clear. However, once registered, you must regularly file VAT returns. Moreover, you must fully and accurately account for VAT on an ongoing basis. In other words, the benefits of multiple VAT registrations come with attendant obligations.
Making global VAT compliance simple
As we can see, registering for VAT in multiple countries can provide tremendous benefits. However, for many companies, the administrative burden of multiple VAT registrations can be overwhelming.
Vatglobal’s powerful VAT technology makes the process easy and efficient. Vatglobal’s proprietary digital solution provides a single point of contact for all your global VAT compliance obligations.
Plus, our expert team will provide ongoing strategic guidance on how to optimise your VAT compliance and take advantage of advanced VAT mechanisms. Get in touch with Vatglobal to simplify your global VAT obligations. It’s the simple solution to the complex problem of global VAT compliance.