EU VAT Area
The EU VAT area is a territory consisting of territory of all member states of the European Union and certain other countries which follow the European Union's (EU) rules on value added tax (VAT). The principle is also valid for some special taxes on products like alcohol and tobacco.
Goods are only considered as imported or exported if they enter or leave the area. The VAT percentage does, however, differ from country to country within the area, which is a complicating factor, especially when, for example, an Internet-based reseller in one EU country sells to an EU customer in a different EU country.
When goods or services are sold to a company across a border within the area, either the buyer pays the sales country's VAT to the seller, or it is possible to register the transaction as an inter-company sale with no VAT being collected. If VAT has been paid the buyer cannot include it in their VAT accounts like VAT paid locally.
When goods or services are sold (and sent) to a private person across a border within the area, the buyer usually pays the sales country's VAT to the seller, and does not pay any VAT in the buyer's country. But if the seller's annual sales of goods to the buyer's country exceed a threshold (which varies by country), the seller must instead charge VAT in the buyer's country. These are known as the distance selling rules. When a private person visits another EU country and buys goods, the seller does not have to take special action, just claim the local VAT, and the buyer can bring it home for personal use or gifts without limits.
EU sellers may validate the VAT number of a buyer residing within the EU Value Added Tax Area using VIES.
Read more about this topic: European Union Value Added Tax
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