Knowledge Base: E-commerce Accounting and VAT Compliance

VAT Registration in European Union countries

VAT registration in European Union countries

Date29 Mar 2024

VAT registration in various European countries is a process that requires not only a general knowledge of the tax system, but also a deep knowledge of local tax laws. Each country has its own unique VAT rules and regulations, so understanding these nuances is key to getting the registration process right.

Important information regarding VAT registration from the perspective of the e-commerce sector

VAT registration, often associated with setting up a company in a country or establishing a branch, takes on a much more complex structure in the e-commerce sector. It should also be emphasized that VAT registration is often enough and the company does not need to establish a new company or branch abroad.

When a company plans to enter a new market in the European Union, it faces the need to register for VAT. This is not just a formality, but a key step in adapting to local regulations. Registration in various EU countries puts companies in front of tax refunds and allows VAT to be charged on transactions with customers in the country. The process gives the company NETP (Non-Established Taxable Person) status, which exempts it from taxation in the country. For companies without, among other things, an office, a stationary store or employees, this is important because it allows you to avoid paying taxes on income in a country where you are only registered.

EU VAT registration obligation for e-commerce entrepreneurs

Registration of a company for EU VAT is necessary in various cases. First of all, registration for VAT is necessary if you plan to conduct transactions with foreign counterparties within the European Union. Thus, if you are considering selling outside of the company’s country of residence, we recommend registering for EU VAT in the country to which you are directing your goods.

In addition, registration is also required for intra-Community transactions. This issue can be a bit confusing, especially when it comes to taking advantage of VAT exemptions based on not exceeding the annual turnover limit. For example in Poland, according to Article 113(1) of the VAT Act, taxpayers whose taxable sales value did not exceed a total of PLN 200,000 in the previous fiscal year are exempt from tax. It is worth noting that this sales value does not include the amount of tax. This limit is determined by the so-called EU VAT registration limit, which must be followed by, and exceeding it in the last 12 months results in the need to register.

Other reasons enforcing registration for VAT include:

  • storage of goods abroad,
  • movement of goods,
  • importing or exporting goods abroad.

Unit VAT rates are set by each country based on local regulations, subject to change according to local rules. In our overview, we present the current Intrastat thresholds and VAT rates in force in various European countries, with the aim of enabling e-commerce entrepreneurs to keep abreast of the latest tax changes.

It is worth noting that careful consideration of the choice of VAT rate, especially the reduced one, can help improve product margins and increase company profits. Therefore, it is crucial to carefully analyze the applicable VAT rates and check the possibility of taking advantage of preferential terms before entering new markets.

It is also worth noting that the fact that in Poland or another country it is not possible to take advantage of a reduced VAT rate does not mean that in another EU country there is no such possibility. Each country has its own regulations on VAT rates, covering different groups of products subject to preferential rates. Therefore, it is advisable to consult a tax advisor to obtain accurate information and optimize your tax strategy.

EU VAT registration for online sellers

VAT registration in the European Union related to the Polish tax system is a process that should be finalized before starting the first foreign transaction on the European market. It is worth noting, however, that while EU VAT registration in Poland is free of charge, it depends on the specifics of your business and your legal status.

If you are a small sole proprietor, you can conduct VAT registration at the tax office competent for your place of residence. On the other hand, if you are a legal entity or an unincorporated business unit, you carry out VAT registration at the tax office that is responsible for the headquarters of your business. If you do not have a registered office in Poland, but conduct permanent business here, you report to the office responsible for your permanent place of business.

For those who do not have a residence or permanent place of business in Poland, VAT registration is possible at the Second Tax Office Warsaw-Śródmieście. However, it is worth noting that tax offices, especially those serving the largest entities with multimillion-dollar revenues, capital from outside Poland, and branches of foreign companies operating in Poland, specialize in handling more complex registration cases.

EU VAT registration process for online sellers

Registering as an EU VAT taxpayer is an important step to think about in order to avoid confusion and facilitate foreign transactions. Before embarking on this process, we recommend submitting a registration application. This form can be filled out in person, sent by traditional mail, or submitted electronically, for example, as an attachment to the CEIDG-1 application if you are running a sole proprietorship.

You should also consider using the Tax Portal, which facilitates the transfer of documents. When filing, it is important to check the option to receive confirmations of the registration stage. This will make you visible in the VIES (VAT Information Exchange System) database, making it easier to check your VAT status.

In addition to personal involvement in tax matters, there is also the option to authorize another person to represent you in these matters. This practical solution allows you to enlist the help of professionals or close relatives in managing the tax aspects, which can be especially important in complex legal issues and formalities.

It is worth verifying what kind of power of attorney we need, taking into account the specifics of the situation. There are different regulations in different countries, so it is advisable to consult professionals who can help tailor a power of attorney to individual needs and local tax regulations.

The EU VAT registration process for Poland takes between two weeks and two months due to numerous regulations designed to prevent fraud and abuse. Once you have successfully completed the registration process, you will receive a new European Tax Identification Number (TIN). From then on, in international transactions, it is necessary to use the TIN with the appropriate prefix, for example “PL” in the case of Poland.

Documents required for EU VAT registration

During the VAT registration process, e-commerce entrepreneurs should be prepared to submit certain documents. While requirements may vary from country to country, below is a list of those most commonly required:

  • company documents, such as the company’s articles of incorporation and proof of company registration,
  • copies of identity documents of the owners or managers of the company,
  • the company’s tax identification number,
  • circumstances from which the tax liability arises,
  • performed and planned intra-Community transactions.

Registration for VAT in European Union countries – necessary information

Discontinuation of intra-Community transactions in Poland
In the situation of cessation of intra-Community transactions on the territory of Poland, it is necessary to report this fact to the head of the tax office. This should be reported to the office within 15 days from the date on which the situation occurred.

EU VAT summary information for Polish entrepreneurs

VAT taxpayers, both active and exempt, who have registered for EU VAT, are required to submit the EU VAT summary information on a monthly basis. The electronic declaration must be submitted to the office by the 25th day of the month following the month in which the tax obligation related to the transaction or movement of goods under the call-off stock procedure arose.

VAT-OSS – optimizing e-commerce transactions in the European Union

Undoubtedly, the area of VAT-OSS cannot be overlooked, which is an important element for e-commerce entrepreneurs operating in the European Union. VAT-OSS, or the Uniform Value Added Tax Reporting System, is an innovative approach that aims to facilitate and streamline tax settlements for cross-country transactions.

Essentially, VAT-OSS covers a wide range of transactions, such as the supply of goods and services to final consumers. A key feature of the system is a common limit for the entire EU, which means that businesses do not have to individually adjust to different limits in each member country.

VAT settlement rules for e-commerce entrepreneurs based in the European Union

With sales not exceeding the limit of 10,000 euros, it is possible to settle VAT at the rate of the country from which the goods are shipped. Settlement is then made at the tax office of the home country.

However, it should be remembered that despite the fact that the net limit of €10,000 is not exceeded, it is possible to voluntarily join the VAT-OSS procedure. This can save the seller from the situation of missing this limit and having to register for VAT locally in several countries. It is important in such a situation of voluntary registration for VAT-OSS to submit additional documents to the US or have experts do it.

However, when the threshold of EUR 10,000 net per year is exceeded, an e-commerce entrepreneur can choose from 3 options:

VAT registration
It is necessary to register and settle VAT with the local Tax Authorities of the country to which goods are shipped to physical customers. This offers the possibility of making sales to the country in question regardless of the place of fulfillment (warehouse, Fulfillment Center, call-off stock or company headquarters).

OSS procedure
An alternative is to register for the VAT-OSS procedure in the country of the company’s headquarters and file quarterly returns in the company’s native language. This is particularly useful for entrepreneurs who do not have warehouses abroad, do not use a Fulfillment Center in other countries, or do not use Amazon’s FBA-type models.

Combination of VAT and OSS procedure
When having a foreign warehouse, it is possible to combine VAT and VAT-OSS procedures. OSS declarations are filed with the tax office dedicated to the VAT-OSS procedure in the company’s home country, while VAT declarations are filed with the local tax office of the country where the foreign warehouse is located.

Controlling the sales threshold plays a key role in terms of successful registration in the OSS system. This is particularly important because the OSS system does not allow for retroactive declarations. In the case of late registration for OSS, it becomes necessary to register with the local tax authority and settle previous transactions with a local VAT return.

Therefore, special caution is advised during periods of increased sales, such as sales, Black Friday or holiday periods. Being aware of the current level of sales will help avoid problems related to the possible need to register with the local tax system.

VAT-OSS registration process

In the context of Poland, in order to use VAT-OSS, a business must register in the electronic system. This can be done by going to the website of your country’s tax authority, and then in the “VAT-OSS” or similar tab (depending on the tax authority in question) fill out a registration form. In the form, you will need to provide information such as your company’s name and address and VAT number. It is important here to check the correctness of the information entered, as the application may be rejected in case of errors. The completed application should be sent to the tax office. In Poland, dedicated to the VAT-OSS procedure is the Second Tax Office in Warsaw.

The process of registering for VAT-OSS in Poland itself is very smooth and can take as long as 2-4 days from the time of application. What can prolong it is the power of attorney, which must be submitted before the application for registration is submitted, and only after it has been accepted by the Tax Office can the VAT-OSS registration application itself be submitted. In this case, the entire process can take 10-15 business days.

Deadlines for filing VAT-OSS returns

The registration takes effect from the beginning of the next calendar quarter after the quarter in which the taxpayer filed a declaration for the OSS procedure.

If the taxpayer begins to provide services or supply goods before this date, the application of the EU procedure takes effect from the moment the provision of services or supply of goods begins. The necessary condition is to notify the head of the Second Tax Office Warsaw-Śródmieście of the commencement of activities under the VAT-OSS procedure by the 10th day of the month following the month in which the service was provided or the goods were delivered, which we want to start accounting under the VAT-OSS procedure.

In this case, the taxpayer is required to file a VAT return covering the calendar quarter in which the first provision of services or supply of goods took place. In the registration declaration, the taxpayer shall specify the date on which he started using the special procedure.

When filing a VAT-OSS return, it is worth remembering that corrections to such a return cannot be filed in this case. That is why it is so important to prepare them carefully. However, in the event that any correction to the VAT-OSS calculation is necessary, it should be done as part of the next VAT-OSS return.

Benefits for e-commerce businesses of accounting through VAT-OSS

For e-commerce companies, participation in VAT-OSS translates into a number of benefits. First, it enables effective management of the tax aspects of international transactions, which not only minimizes the risk of billing errors, but also contributes to the company’s overall operational efficiency.

In addition, using VAT-OSS can significantly improve a company’s competitiveness in the European market. By eliminating the unnecessary administrative burden of having to register in multiple countries, an entrepreneur can focus on developing strategic aspects of the business. This allows for more flexible adaptation to changing market conditions and a dynamic e-commerce environment.

Equally important, participation in VAT-OSS improves access to the broad European market, facilitating the effective penetration of new customer segments. Companies using this solution can respond more efficiently to customers’ expectations and needs, resulting in building a stronger market position and a positive impact on financial performance.

An obvious step for an entrepreneur planning to expand abroad is to register for EU VAT. This registration becomes not just a formality, but a key part of adapting to local tax regulations.

Entrepreneurs should pay special attention to the variety of tax rates and the extensive regulations on intra-Community transactions in force in Europe. Optimizing the tax strategy, taking into account preferential VAT rates, can help improve product margins and increase company profits.

In the context of tax facilitation for e-commerce entrepreneurs, an important tool is VAT-OSS. It allows the filing of a single VAT return for all cross-country transactions, significantly reducing administrative costs. It is worth noting, however, that the use of VAT-OSS is only possible for the shipment of goods from the home country, which means that only entrepreneurs without a physical presence in other countries can effectively use this solution.

Precise analysis and adaptation of the strategy to the specifics of each country are key to successfully circumventing the complex tax regulations of the European Union, which can ultimately contribute to the success of a company’s expansion into foreign markets.

If you have any questions about VAT registration in EU or other issues, feel free to contact our experts: contact – amavat®.

Dominika Lech

Social Media & Marketing Assistant at getsix®, amavat®, HLB Polska. In the company since May 2023. Interested in Social Media, content marketing, and the e-commerce industry.

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