If you’re selling digital services and products to customers in the European Union, then you might be liable for the EU’s Value-added Tax (VAT). This guide covers two very important parts of the system:
- Registering for the tax, and then
- Filing tax returns on time.
We’ve scoured the European Commission’s website to provide you with all the necessary information about VAT for international businesses in one place.
How to register for VAT in the EU
Your business has to be registered in the VAT system to legally sell any digital goods within the EU. Depending on the country where you register, this could be a one-step or two-step process.
Register with a tax authority in the EU
If your business is in the bloc, simply register for VAT in your home country! Businesses that sell digital products have the option to register for the One-Stop Shop (OSS), an online tax portal that really streamlines and simplifies the process.
If you run a business outside of the EU, you can choose any member state to host your tax registration. You must sign up with that country’s OSS to receive an EU VAT number.
Don’t know which country to pick? Well, you have 28 to choose from. Here are some tips for choosing the right EU base for your VAT processes:
- A common language. Do you speak any of the languages within the EU? If so, go ahead and register in that country, so you can easily understand all tax documentation, guidelines, and processes.
- If you’re looking for an English-speaking base, Ireland is your best bet. But some other EU countries also offer their tax process in English, like Spain for example.
- A well-functioning website. By law, every EU member state must offer an online portal for EU VAT OSS. But to be honest, some countries are more on top of it than others.
Once you’ve decided where to register, find that country’s OSS portal, sign up, and follow the instructions for VAT registration.
Some countries will automatically issue your business a VAT number when you register; others will only give you a local tax number at first, and require you go through an extra step for a VAT number.
This is typically a 9-digit number that has two letters in front (the letters correspond to the country where you registered). It’s a unique identifier they’ll use to identify you in the system, and which you’ll need to put on invoices, etc.
For a more in-depth look, read more about how to get an EU VAT number as a foreign business.
How to file VAT returns in the EU
All tax returns must be filed in the home currency of the country where you’re registered. Remember: not all member states use the Euro!
When you prepare to file, you should convert all transactions to the home currency. A good reference point for this is the European Central Bank’s list of exchange rates.
When to file and pay
You must file a VAT OSS return every quarter.
From the end of the quarter, you have 20 days to file and pay whatever you owe. So the VAT return deadlines are as follows:
- 20 April, for the first quarter ending 31 March
- 20 July, for the second quarter ending 30 June
- 20 October, for the third quarter ending 30 September
- 20 January, for the fourth quarter ending 31 December
Note: You must still file every quarter even if you made no taxable sales! This is typically called a “Nil declaration” and it follows the exact same process as a normal return. (Just a little less data entry 😉)
How to file
Before you get started, you should collect all the information about your taxable sales in all EU countries during the previous quarter. The tax website suggests having these pieces ready:
- total sales and income
- total purchases and expenses
You can file online in your home country’s VAT OSS portal.
How to pay
You’re expected to pay in the home currency.
The portal will automatically calculate how much money you owe in total, to all EU countries, and will ask for a single payment. (OSS distributes the right amount of tax to each country on your behalf, which makes it super easy for you!)
What to do in between registering and filing?
Well, you must comply with all the rules for EU VAT! That means charging the local VAT rate on all B2C sales in the bloc, among other things.
For further reading that will help you stay compliant and successful as a remote seller, check out our Ultimate Guide to EU VAT for Digital Taxes.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.