I sell products to European customers, do I need a VAT-number?
Manufacturers from overseas, who intend to sell products to customers in Europe, often ask about the European Customs tariff, and if they need a VAT number. Here is a short explanation about the necessity of a VAT number. First it is important to establish who shall act as the importer of record.
Who is the importer of record?
1. When the European customer is the importer of record, the non-EU seller generally doesn’t need a European VAT number. His sale is considered to be outside the scope of European VAT. So far so good. As soon as the non‑EU seller acts as the importer of record, he will generally need a VAT-number. At this point, it is important to understand that the import of products in relation to a sale to a customer in Europe, always results in at least two taxable events that attract VAT. One is the import and the other is the consecutive delivery to the customer.
Let’s look at the import first
2. The import itself is taxable with VAT. Therefore upon import, the importer is charged with import VAT. You’ll see it on the invoice from your forwarder for the customs clearance. The VAT rate differs, depending on the country in which the goods are customs cleared. The import VAT generally is fully refundable or deductible, but several European countries provide for the possibility to avoid having to actually pay the import VAT. In the Netherlands for example, it is possible to avoid having to actually pay the import VAT, by appointing a locally established fiscal representative. That can be either a general or a limited fiscal representative. I’ll explain the different forms of fiscal representation another time. We would be glad to help you here.
Then about the delivery to your customer
3. If the seller acts as the importer of record, the sale to the customer is also subject to VAT. Most commonly, VAT will be payable in the country where the import took place, but that can be different, specifically when it concerns consumer products that are sold directly to individual (non-business) customers. In that case, the so called distance sales regime may apply. I’ll have to explain that another time as well. Feel free to call or to send us an email.
4. Once you have determined in which country the supply is deemed to take place, you have to establish which rate applies, and who is to declare and to pay the VAT to the local authorities. The supply can be subject to the:
- Standard rate
- Reduced rate
- Zero rate
- Reverse charge rule
Which one applies, depends on the details of the delivery. This would no longer be a short information sheet, if I’d explain the aspects of the various rates and reverse charge rules here as well. Feel free to send me an email if you have a specific question. Coming back to the initial question now; do I need a VAT number?
5. The non-EU seller will generally need a VAT number if the standard rate, or the reduced rate applies and also when the zero rate applies. You will need this VAT-number in order to be able to declare the VAT payable. Note that the import VAT paid on the import of the products will be deductible from the VAT payable in the country of import. So, generally the seller will need to a apply for a VAT number if (i) he is the importer of record and (ii) the consecutive delivery is subject to either the standard, reduced or zero rate (i.e. is not a domestic delivery subject to the reverse charge rule).
Any other obligations?
6. In some EU Member States – usually southern – non-European companies must appoint a locally established fiscal representative. Other countries European countries do not have such a requirement. It may be recommendable though, depending on the situation to appoint a fiscal representative anyhow, when it allows you to benefit from certain simplifications. In the Netherlands for example, by appointing a limited fiscal representative, all consecutive supplies of imported products are declared under the VAT-number of the ltd fiscal representative, so you’ll be relieved from having to apply for a VAT number yourself.
This information is not provided in the course of an attorney-client relationship and is not intended to constitute legal advice. This information should therefore not be used as a substitute for competent legal advice.