The EU VAT directive is a document, created by the European Commission, that contains the common rules governing Value Added Tax collection and regulation in the EU. Based on the EU laws, member states must incorporate the directive in their national legislation. Even though the directive does not unify the VAT related laws within the member countries or define requirements for receiving an EU VAT identification number, it draws a framework and introduces some tax-related restrictions in the union. It is important to know the most important implications of the directive: a defined place of supply and the restrictions of VAT EU rates, and an OSS platform for digital sales.
Place of supply as defined in the EU VAT directive
Even though the directive applies to all European member states, the taxation in each of these countries is not uniform. In order to achieve smooth transactions and clarify the country responsible for VAT collection, the European Commission defined what is the place of supply when selling goods in the EU. Based on the directive, the place of supply of goods is either the location at the time of supply or the place where the customer is located, whenever intra-community goods are delivered, or power supplies used.
VAT rates and thresholds
The VAT Europe directive prohibits the member countries from setting a standard VAT rate below 15 per cent. It allows countries to have two reduced VAT rates above 5 per cent and does not set a maximum VAT rate. If you are interested in the EU VAT check the website of the European Commission for a comprehensive list of VAT rates in the EU member states.
In contrast to the EU VAT rate policy, the European Commission does not regulate VAT thresholds in the member states. This means that companies operating in several member states must consult the local tax authorities to learn about the VAT thresholds that need to be exceeded in order to register for an EU VAT number.
Digital sales in the EU
The EU has created the MOSS system for digital sellers that allows companies to avoid registering for a European VAT number and paying VAT in multiple countries separately. Companies that are eligible to use the platform and receive VAT number EU come from website hosting, software development, database, apps or music downloads, online gaming, and distance teaching areas. Both the businesses originating from the member states and companies from abroad can take part in the MOSS system. Foreign companies that wish to enrol in MOSS need to register for the EU VAT number in one of the member states and use the received VAT tax ID to access the platform.