The VAT filing deadline in most of the European countries is approaching
If VAT has been paid on expenses within the European Union (EU) after 1 January 2016, the invoices should be gathered and sent to our office as soon as possible in order to meet the June 2017 VAT filing deadline. The filing preparation has to begin 3 months before the June VAT filing deadline because an IRS certificate has to be ordered, which can sometimes take up to 3 months to receive..
The European Union calls the 160 Billion VAT Gap “unacceptable”
This year a study was conducted by the EU commission providing an estimate of revenue loss to fraud among the EU countries, also called the VAT Gap – the difference between expected VAT revenues and VAT actually collected. According to the study, the countries within the European Union lost an estimated 160 billion in uncollected VAT revenue in 2014. According to the European Commission this is “unacceptable” and a plan of action will be set in place next year to tackle this issue.
The VAT gap rate ranges from country to country with Romania at the top with 37.9% uncollected VAT, and Sweden at the bottom with only 1.2%. The European Commission is determined to push to reform VAT within Europe and legislative proposals are presented for 2017 in order to tackle tax fraud and re-establish the principle of charging VAT across the boarders within the EU. The European commission will support the sharing of information among the European countries and work together with companies to address and prevent fraud. The modernized EU tax administrations will be on lookout for any EU and North American company not following the local VAT laws or charging VAT to customers on cross border trade.
New stricter VAT rules for North American companies selling online to customers in Europe
The United Kingdom (UK) has realized that many North American companies are not following the local VAT regulations when selling goods in the UK via online marketplaces. In attempt to make non UK companies VAT compliant, the UK has decided to take action by giving HM Revenue & Customs (“HMRC”) the power to make an overseas business appoint a UK VAT representative. Together they will be responsible and liable for any unpaid UK VAT. In addition, the newly introduced UK VAT laws will also allow HMRC to hold an online marketplace liable for any unpaid VAT on behalf of an overseas company that sells goods in the UK via the online marketplace’s website.
The reason for these new VAT laws within the UK is that HMRC has noticed that overseas businesses that sell goods that are located in a UK warehouse at the time of sale to UK costumers via online marketplaces such as Amazon, Ebay and others are not registered for VAT, and are also not paying VAT on the full retail price. This makes it challenging for non UK companies that are legally registered for VAT since goods that shipped and stored in a UK fulfilment warehouses by non VAT registered companies before being sold to UK consumers are offered a lower price.
These new measures will begin in 2017, and HMRC will be on the lookout for any North American company that is not VAT compliant. These companies will be tracked down one by one to appoint them with a UK tax representative, or have them register for a local VAT number. In order to avoid back taxes and penalties, and to find out if your company is required to register and charge VAT within the EU, please contact our VAT experts.
The Danish Tax Authorities are closely following the footsteps of the German Tax Authorities
Several U.S. companies doing business within Germany have indicated that they have been contacted by the German tax authorities, and now the Danish tax authorities are doing the same. Since January 1 of this year the Danish tax authorities have the authority to access information from banks and credit card companies in order to trace any non-Danish vendor that sells goods and services online to private people within Denmark. These companies are often unaware that they might be required to register for VAT and charge VAT to the private customers. The call from the Danish tax authorities might come as an unpleasant surprise since they demand that the company declares and pays in the VAT due from sales to Denmark. If this is not done per Danish law, the North American company can expect back taxes and penalties. To find out if your company is required to register and charge VAT within the EU, please contact our VAT experts.