Intracommunity VAT: Everything you need to know about Value Added Tax on intracommunity transactions
Patrick2023-11-25T13:21:37+00:00Introduction: What is Intracommunity VAT and how does it work?
Intracommunity VAT is a key concept in the field of invoicing and commercial transactions within the European Union. It refers to the value added tax levied on purchases and sales of goods between businesses located in different member countries.
Unlike national VAT, where the tax is paid on each transaction, Intra-EU VAT allows transactions between businesses in different countries to be exempt from VAT. This means that a business does not pay VAT when buying goods from a business in another EU country, nor does it charge VAT when selling goods to a business in another EU country.
However, this does not mean that intra-EU VAT is completely exempt. Businesses must make a specific declaration to report these transactions and comply with certain legal requirements. In Spain, this declaration is made using form 303, which details both the VAT charged and deductible.
In addition, your client is a natural person who is not acting as a self-employed or professional person and has to charge VAT. Even if your client is a company but is not registered with the ROI or Vies, you have to charge VAT.
Important : from 1st July 2021 and by the Royal Decree Law 7/2021 of 27th April, if your company sells goods to individuals in another European country and the total taxable base of that VAT in that country exceeds 10.000€ you will have to pay VAT in that country. Don’t worry, this is called SINGLE WINDOW and you don’t have to ask for a VAT number in each country as before. It is paid through form 369 and you pay it to the tax office in Spain. And the AEAT is in charge of paying the different European tax agencies.
The intracommunity VAT number is by putting the letters ES in front of your N.I.F. number.
For companies: ESCIFNUMBER
For self-employed or professionals: ESNIFNUMBER
Benefits of the special intracommunity VAT scheme for businesses and the self-employed
The special intracommunity VAT regime offers numerous benefits for both companies and self-employed individuals carrying out international transactions.
One of the main advantages is the exemption from VAT on transactions with other EU countries. This means that companies and freelancers do not have to pay the tax when making an intra-EU sale or purchase, which means significant cost savings. Note, you don’t pay it but you do have to declare it. It is accounted for as a normal invoice, but you charge and deduct vat at the same time.
In addition, this special regime also helps to reduce the logistical costs associated with international transactions. By eliminating the payment of VAT on these operations, customs formalities and the costs associated with them are also eliminated, which speeds up the process and reduces additional expenses.
In summary, the special intracommunity VAT regime offers important benefits for companies and self-employed workers, including administrative simplification in international transactions, exemption from VAT on operations with other EU countries and reduced logistics costs. These advantages help to boost international trade and facilitate business growth within the common European market.
How intracommunity VAT works: Rules and requirements
Intracommunity VAT is a tax system that applies to commercial transactions between companies in different EU countries. This system aims to simplify and harmonise the collection of Value Added Tax (VAT) in international transactions.
With regard to the VAT declaration in international transactions, it is necessary to comply with a series of procedures and legal requirements.
- Filing form 036 or 037: To start your activity as a self-employed person or company, it is necessary to file form 036 or 037. This form must include the census declaration, which details important information about your business, as well as the application for registration in the Register of Intracommunity Operators (ROI) if applicable. Submitting these documents is a fundamental step in complying with the required tax and legal obligations.
- To have a real economic activity, it is necessary to be formally registered as self-employed or to have an incorporated company. In addition, it is crucial that the activity is actually in operation and is not just a fictitious registration.
- It is essential to keep the accounts up to date in order to comply with tax obligations. This means constantly updating the accounting records so that the authorities can verify all business transactions carried out. By doing so, you ensure that you have a reliable and accurate record of all your financial activities.
- Also it is essential not to have any debts with the Spanish Tax Administration Agency (AEAT). Always remember to comply with your tax obligations to avoid future inconveniences.
The way it works is very simple, you deduct and pass on the vat in the quarterly or monthly VAT return and so the vat payable on intra-Community operations is Zero.
Registration and Obligations for Intracommunity VAT Transactions
Registration in the Register of Intracommunity Operators (ROI) is done by submitting form 036 to the tax agency and is a mandatory requirement for those who carry out commercial operations within the European Union.
To register in the Register of Intracommunity Operators (ROI) you will have to complete form 036 of the State Tax Administration Agency (AEAT).
On this form, you must tick box 582 and provide the date on which you plan to carry out your first intracommunity transaction in box 584.
If you have previously applied for registration as a self-employed person with the tax authorities, you should tick box 130 (modification) and also boxes 582 and 584.
It is important to note that if you decide to deregister from the ROI at some point, you will have to complete form 036 again and tick box 583.
This registration allows companies to carry out transactions without having to pay Value Added Tax (VAT) in each member country.
The tax agency wants to have a list of all intracommunity operators in order to avoid fraud.
In order to do so, and when filing the 036 form, you will have to provide proof of why you want to register for intracommunity VAT. You will have to explain in advance the operations you are going to carry out.
You will have to prove that you have a permanent establishment in Spain with the deed or lease contract of the premises or house from which you are carrying out the activity. The details, if possible, of the companies or clients with whom you will be operating.
Once a company has registered with the ROI, in addition to filing the quarterly VAT return form 303 and the annual return form 390, it is obliged to file a recapitulative return of intracommunity operations.
This return, known as form 349, must be filed on a monthly or quarterly basis, depending on the tax regulations if a monthly or quarterly VAT return is filed.
It is important to note that in some specific situations, such as reverse charge transactions, the responsibility for VAT payment is reversed. This means that the recipient of the goods or services is the one who must declare and pay the corresponding tax.
Important: always check that the customer or supplier with whom you make a purchase or sale of goods or services is registered with the Roi (or Vies) at this link.
It is important to note that the deadlines according to the law and processes take between 1 and 3 months, even the tax agency can physically go to your office, warehouse or workplace to confirm that the activity is real.
Complying with these tax obligations in a timely manner is essential to avoid penalties and maintain a good business reputation. In addition, keeping up to date with related regulations
Steps to apply for an Intracommunity Tax Identification Number (TIN)
Obtaining an intracommunity tax identification number (TIN) is essential if you want to do business within the European Union. Fortunately, the process of applying for a TIN is not complicated, as long as you follow the right steps and have the necessary documentation.
The first step in obtaining an intracommunity number VIES is to make sure you meet the requirements set by the tax authorities. Generally, you will be asked to prove that you have a real economic activity in the country where you are applying for the TIN.
The registration is presented through form 036 and you will have to provide, because you want to register with the Roi, details of your future clients or suppliers, the deed or lease of the address from which you carry out the activity. The tax office may ask you for more information such as invoices or commercial contracts.
This is because HACIENDA wants to know if your activity and need to obtain the Roi is real. That you really exercise the activity.
You can do this in person at their offices or by electronic means if they are available.
What to put on an intracommunity vat invoice
The intracommunity invoice is made like a normal invoice, you simply do not have to put the vat or put zero in the VAT and add the text “Operation exempt from VAT by application of article 20 of the law 37/1992 of the VAT”.
We recommend you to make the intra-community invoices with a different series but it is not compulsory.
Intracommunity VAT penalties and infringements
It is important to bear in mind that you must be registered in the Register of Intracommunity Operators (ROI) in order to be able to issue an intra-Community invoice. Without this registration, any sale you make to a European Community country will include Spanish VAT and must be treated as an internal operation. Make sure you comply with the necessary requirements to avoid any fiscal inconvenience.
As you are not registered with the ROI, you will not be able to apply the VAT exemption on your intra-EU transactions, which could increase costs for your customers. It is important to bear in mind that if the Tax Authorities detect that you are carrying out transactions with EU companies without being registered in the Register of Intra-Community Operators (ROI), you could face fines and penalties. These penalties will vary depending on the seriousness of the infringement, its repetition and the amount of the transactions.
Fines are divided into three categories: minor, serious and very serious.
- In the case of minor fines, you will have to pay 1% of the amount of the transaction, with a minimum of 150 euros and a maximum of 600 euros.
- Serious fines can be up to 2% of the amount, with a minimum of 300 euros and a maximum of 30,000 euros.
- Finally, very serious fines will be 4% of the amount, with a minimum of 6,000 euros and a maximum of 600,000 euros.
In addition, it is important to note that if you are not registered with the ROI you will not be able to apply the VAT exemption on your intracommunity transactions. This means that your customers could face additional costs by having to pay this tax on the products or services purchased.
Therefore, it is essential to comply with all tax obligations established by the tax authorities to avoid possible financial penalties and to ensure proper tax management of your commercial transactions within the EU.
Failure to comply with tax obligations related to intracommunity VAT can have serious legal and financial consequences for companies. One of the most common penalties is the failure to submit the recapitulative return on time.
It is important to remember that the recapitulative return is a fundamental document for informing the Tax Administration about transactions carried out with other EU member countries. Late filing or failure to file it can result in considerable fines.
In addition, non-compliance with intra-EU VAT obligations can lead to other negative consequences, such as in-depth tax inspections, late payment surcharges and interest, and loss of confidence on the part of customers and suppliers.
It is therefore crucial that businesses keep up to date with their Intracommunity VAT obligations and file their returns in a timely manner. This will not only avoid penalties and legal problems, but will also contribute to maintaining a good business reputation and solid business relationships within the European market.
What you need to know about intracommunity VAT
Intracommunity VAT is the value added tax levied on commercial transactions between member countries of the European Union. The purpose of this tax is to regulate and facilitate trade within the European single market.
Intra-EU transactions refer to transactions in goods and services between companies or professionals established in different EU countries. These transactions can include both imports and exports. In other words, delivery or acquisition of goods and services. The intra-community VAT number is by putting the letters ES in front of your VAT number.
If you have questions about whether you meet all the necessary requirements, it is advisable that you contact Asesoría Orihuela Costa. We have a team of advisors who specialise in this type of situation and we are used to dealing with them on a daily basis. By consulting us, you can avoid the hassle of dealing with all the paperwork and headaches that this can entail.