What is VAT registration?

VAT registration is the process by which a company obtains a VAT number so that it is authorised to conduct business in a country.

How does VAT registration work?

The VAT registration process begins by collecting all the required documentation, which is then submitted to the tax authorities of the country. While some countries, like the UK, offer a straightforward registration process (allowing companies to complete the VAT registration online using a simple form), others, such as Spain, require additional steps and more complex documentation, including sworn translations or notarised and apostilled documents.

After submitting the application package to the tax authorities, a VAT number is issued. This is essential for all VAT-related transactions and interactions with the country’s tax authorities.

Once VAT-registered, a company may be required to charge VAT on its sales invoices and may also be entitled to reclaim VAT paid on its purchases. Additionally, it must comply with various tax obligations, which may include submitting VAT-related declarations, real-time reporting, and electronic invoicing, depending on the requirements of the country where it is registered.

How long does VAT registration take?

The timeline to obtain a VAT number varies from country to country. In some cases, such as the Czech Republic and Greece, the VAT number can be issued in less than a week after the application package is submitted. In contrast, countries like Germany and Italy can have longer processing times exceeding one month.

What triggers VAT registration?

In many countries, VAT registration is mandatory once a business exceeds a certain threshold of taxable turnover. This threshold varies by jurisdiction, so companies must be aware of the requirements specific to the countries where they operate to stay compliant and avoid potential penalties.

A few of the most common triggers include:

• Revenue threshold: most countries require businesses to register for VAT when their turnover exceeds a specified threshold, and depending on the type of operation, that threshold can be as high as 0 EUR
• Distance selling: companies engaged in cross-border selling within the European Union used to have to register for VAT in each country where sales exceeded a certain threshold. Since 2021, the EU has introduced the One-Stop Shop system to help simplify this process
• Importation of goods: companies importing goods into a country where they do not have a presence may need to register for VAT, depending on the type of importation and the subsequent supply of those goods
• Business-to-business (B2B) transactions: B2B transactions might trigger VAT registration requirements, even if standard turnover thresholds aren’t met
• E-commerce and digital services: companies engaged in online sales or provision of digital services may need to register for VAT in various jurisdictions. In recent years, there has been significant growth in cross-border digital services, prompting countries worldwide to adapt their legislation to accommodate this trend. As these legislative changes are implemented rapidly, companies in this sector must be especially attentive. In some cases, the retrospective regularisation of operations can have significant financial implications for the company

What are VAT registration challenges globally?

The complexity of the VAT registration process increases with globalisation, as companies may need to register for VAT in countries where they do not have a physical presence. As such, multinational companies face significant challenges today navigating the global tax landscape such as:

• Identifying obligations: VAT rules differ significantly by country, and companies must accurately assess their responsibilities in each jurisdiction
• Language barriers: Europe alone has 24 official languages, adding another layer of complexity when dealing with local tax authorities
• Additional workload: each country comes with its own set of VAT obligations, creating a big administrative burden
• Risk of penalties: noncompliance can lead to high penalties, interests, and legal repercussions for companies and, in some cases, for their legal representatives
• Multiple VAT service providers: many companies find themselves working with different VAT service providers in each country, further complicating their operations and day-to-day management

What is the role of a VAT agent or fiscal representative?

VAT agents and fiscal representatives help companies with local VAT laws and ensure compliance. While VAT agents assist with registration and filing, fiscal representatives may be legally responsible for a company’s VAT obligations. Because of this liability, some countries require a bank guarantee or cash deposit to be provided upon registration.

The requirement to appoint a fiscal representative varies by jurisdiction. For example, while a fiscal representative is generally mandatory for non-EU companies VAT-registered in France, it may not be required for EU-based companies. In the Netherlands, even EU-based companies must appoint a fiscal representative to benefit from the VAT deferment license for imports. Following Brexit, many EU countries now require UK companies to appoint a fiscal representative upon registration, increasing the need for this role.

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