European Union Value Added Tax Area


European Union Value Added Tax Area

The European Union Value Added Tax Area is an area consisting of all the European Union member states and certain non-member states which follow the value added tax ("VAT") harmonization rules of the European Union Value Added Tax ("EU 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 can include it in their VAT accounts just like VAT paid locally.

When goods or services are sold 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 local VAT. 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. [HMRC VAT Notice 725, p.21]

Geographical extent

Included areas

*all EU countries except most non-European areas (see below)
*Isle of Man (included with the United Kingdom of Great Britain and Northern Ireland)
*Monaco (included with France and charges the same rate of 19.6%)

Excluded areas

*not included in Denmark:
**Faroe Islands 1
**Greenland 1

*not included in Finland:
**Åland4

*not included in France:
**overseas departments, such as Réunion and Guadeloupe 1 2

*not included in Germany:
**Büsingen am Hochrhein 5
**Heligoland 3

*not included in Italy: some parts bordering to Switzerland
**Campione d'Italia 5
**Livigno 5

*not included in Netherlands:
**Aruba1
**Netherlands Antilles 1

*not included in Spain:
**Canary Islands 3
**Ceuta 3
**Melilla 3

*not included in United Kingdom:
**Gibraltar 3
**Channel Islands 1 3
**British overseas territories 1

Reasons:
# Not part of the EU (often part of "Overseas Countries and Territories").
# Part of the EU, but far outside Europe.
# Areas with no or very low VAT.
# Åland has excluded itself to allow duty free sales onboard boats.
# Enclaves inside Switzerland have a VAT union with Switzerland.

Areas with special rules

* Sweden does not want to accept the VAT union regarding alcohol (see Systembolaget) and tobacco shipped to private persons. Sweden has had a law forbidding such trade, but a court has interpreted the EU law so that it must be allowed. Still Swedish alcohol or tobacco tax will be added by Swedish customs authorities even if the sales country's tax has been paid. Since 2003 alcohol and tobacco for personal use can be brought into Sweden without a specific limit when travelling.

See also

* Special member state territories and the European Union
* Value added tax identification number

References

External links

* http://ec.europa.eu/taxation_customs/common/faq/faq_1179_en.htm#9


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