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How does the current EU VAT system work?

VAT and EU transactions

Currently, a transitional system is in place for VAT on intra-EU transactions. Under this system, when it comes to cross-border sales between businesses, VAT is collected in the Member State of destination (i.e. where the goods are sent to or where the recipient of services is established), in line with the rate and conditions of that country.

This means that the supplier of goods or services does not charge VAT, but the recipient is responsible for paying it. Both the supplier and recipient must conform to special reporting obligations. It should be noted that there are many exceptions to these rules. For example, VAT on transport is paid where the transport occurs and VAT on cultural events occurs where the show takes place.

The rules for intra-EU transactions differ from purely domestic transactions, where the supplier charges VAT and is responsible for paying it to the Treasury.

For goods or services provided to private individuals (i.e. business to customer), the VAT is paid by the supplier in the Member State where the sale occurs or where the supplier is established. However, there are certain supplies for which different rules apply e.g. distance sales, new means of transport, certain services etc. 


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Comments (4)
Comment by alessandro on Mon, Oct 6th, 2014 at 11:54 AM
My case: I
Comment by Pallav Jaini on Mon, Dec 22nd, 2014 at 1:49 PM
Hi Arjan,What about suppliers of service (holiday packages) are based outside EU, such as Chile?Then VAT is not applicable right?Thanks!Pallav
Comment by Arjan Enneman on Thu, Feb 26th, 2015 at 6:45 PM
This is a distance sale. You indeed fall under the Dutch VAT, but if your sale to Italian individual clients reaches EUR 35,000 in a year you will have to register for VAT in Italy too and then charge Italian VAT to your Italian individual clients instead. For every EU country different thresholds apply.
Comment by Arjan Enneman on Thu, Oct 15th, 2015 at 9:19 AM
If the service provider is in Chile (services is provided in Chile) then Dutch VAT is not applicable.
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