How to settle VAT between EU countries?

Entrepreneurs running a business today have plenty of opportunities to attract new customers. International business has potential and is a great business extension within the country. However, doing business in more than one country certainly generates complications that can scare entrepreneurs away. The European Union has simplified the business rules within its borders, encouraging new entities to conclude intra-Community transactions. One of the rules is simplifying the settlement of VAT between EU countries.

What is a VAT tax?

VAT (Value Added Tax) is a consumption tax charged on the sale of goods and services. There are two types of VAT: input and output. Input VAT is a charge incurred by going through each stage of production and distribution of goods. Output tax is the VAT paid by the customer on purchase, as it is added to the price of the goods or services.VAT paid in the previous stages is not paid again. VAT is added only on the value added at subsequent stages of product production. In other words, VAT is accumulated until it is finally recovered in full from the final purchaser.

What are the EU VAT Directives?

Familiarizing yourself with tax laws and VAT directives in each country would be a nightmare. The European Union has decided to simplify the process of trade between EU Member States. Many mechanisms have been introduced to encourage entrepreneurs to act and try their luck in intra-Community trade. Thanks to this within the framework of the introduced mechanisms, transactions between EU Member States are much less troublesome. It sounds perfect, but EU mechanisms obviously have their limitations, which means that not all transactions can be settled through them.

National or EU law – which one is more important?

The EU VAT directives unify the tax situation by creating uniform rules applicable throughout the European Union. The overall aim is to create universal rules that apply across the community to prevent one EU country from imposing laws or taxes that go far beyond what is allowed within the community.

EU law takes precedence over the rules of a local European country, which is very beneficial for intra-Community entrepreneurs, as it significantly reduces the need to stay up to date with local tax regulations.

Until recently, entrepreneurs conducting business in the European Union followed the rules referred to as VAT MOSS. However, the existing rules have been updated, and now businesses have two mechanisms at their disposal: VAT OSS and VAT IOSS (Import One Stop Shop). You can learn the exact rules of VAT between EU countries operations by going to the website .