Why Register for VAT in Foreign Jurisdictions?
Businesses who provide goods or services in a foreign jurisdiction with a VAT regime 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 in the country 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).
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.
Non-resident VAT registration
All EU and many non-EU countries permit non-resident VAT registration if a business undertakes taxable activity in the country. Rules for registration may differ to those for local businesses.
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.) can register for VAT despite being ‘non-resident’. In some 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.
Retrospective VAT Registration
Obligations to register for VAT may arise at various points. Businesses must ensure registration is effected at the correct time to avoid non-compliance and the imposition of penalties and interest.
It is your obligation as a business to register for VAT prior to undertaking any taxable activity in a foreign jurisdiction.
If you have already made taxable transactions but failed to register, the legislation in most countries allows you to register with a back-dated registration date. It is imperative that all transactions that took place after that retrospective registration date are declared and accounted for compliantly.
Vatglobal has experience in resolving the issues associated with retrospective VAT registrations and can advise you accordingly. Contact us for assistance.
De-registration of VAT
If a business no longer makes taxable supplies in a country, and has no reason to be registered for VAT, de-registration or de-activation from VAT may be required.
Once registered for VAT a business is obligated to comply with all VAT compliance rules and reporting deadlines. However, if taxable business activity no longer exists in the country, or if the company has ceased trading, it is permitted to cancel the VAT registration. This can be in the form of de-registration or de-activation of the VAT number.
Some countries may have minimum registration periods, so even if the taxable activity has stopped, the company may still be obliged to file VAT returns (nil returns) until this period lapses. A de-registration will not be accepted by a tax office if there are any outstanding VAT returns to be filed or if there are tax office queries or audits which have not been resolved.