What Businesses Need to Know about the VAT Registration Process

For companies operating internationally, understanding the value added tax (VAT) registration process is essential for maintaining compliance with tax regulations. In this article, Cristela Mota, Director, VAT Compliance, Consulting and Recovery, provides a high-level overview of VAT registration and the complexities across different countries and offers clarification on cases when companies may be required to register, including the need to appoint VAT agents or fiscal representatives.

1. What Is VAT Registration?

VAT registration is the process by which a company obtains a VAT number so that it is authorised to conduct business in a country.

2. How Does VAT Registration Work?

Typically, the VAT registration process begins by collecting all the required documentation, which is then submitted to the tax authorities of the country. While some countries, like the UK, offer a straightforward registration process (allowing companies to complete the VAT registration online using a simple form), others, such as Spain, require additional steps and more complex documentation, including sworn translations or notarised and apostilled documents.

After submitting the application package to the tax authorities (whether via email, online form, postal service, or in-person at the tax office), it is reviewed by the relevant authorities, who then issue a VAT number. In some countries, companies may receive different identification numbers, such as SIRET and SIREN in France or Steuernummer in Germany and Austria.

The VAT identification number is essential for all VAT-related transactions and interactions with the country’s tax authorities. Once VAT-registered, a company is required to charge VAT on its sales invoices and is also entitled to reclaim VAT paid on its purchases. Additionally, it must comply with various tax obligations, which may include submitting VAT-related declarations, real-time reporting, and electronic invoicing, depending on the specific requirements of the country where it is registered.

3. How Long Does VAT Registration Take?

The timeline to obtain a VAT number varies from country to country. In some cases, such as the Czech Republic, Belgium, and Greece, the VAT number can be issued in less than a week after the application package is submitted. In contrast, countries like Germany, Italy, and Hungary typically have longer processing times, often exceeding one month.

4. What Triggers VAT Registration?

In many countries, VAT registration is mandatory once a business exceeds a certain threshold of taxable turnover, even if they have no physical presence therein. This threshold varies by jurisdiction, so companies must be aware of the requirements specific to the countries where they operate.

There are several triggers that can lead to a company having to obtain a VAT registration, and companies must be aware of these to ensure they remain compliant with international VAT laws. A few of the most common triggers include:

1. Revenue threshold: Most countries require businesses to register for VAT when their turnover exceeds a specified threshold, and depending on the type of operation, that threshold can be as high as 0 EUR.
2. Distance selling: Companies engaged in cross-border selling within the European Union (EU) used to have to register for VAT in each country where sales exceeded a certain threshold. Since 2021, the EU has introduced the One-Stop Shop (OSS) system to help simplify this process.
3. Importation of goods: Companies importing goods into a country where they do not have a presence may need to register for VAT, depending on the type of importation and the subsequent supply of those goods.
4. Business-to-business (B2B) transactions: B2B transactions might trigger VAT registration requirements, even if standard turnover thresholds aren’t met.
5. Commissionaire arrangements: When a company sells goods on behalf of another business within a country, VAT registration may be needed.
6. Warehouses, consignment, and call-off stocks: When goods are stored in another country in a warehouse or are delivered to customers on demand, it can trigger VAT registration.
7. Place of supply rules: VAT registration may be necessary depending on where the supply of goods or services is deemed to take place.
8. Land and immovable property: Selling or leasing property in another country may trigger VAT registration.
9. Supply and install contracts: Providing services with installation or assembly in another country can require VAT registration.
10. E-commerce and digital services: Companies engaged in online sales or provision of digital services may need to register for VAT in various jurisdictions. In recent years, there has been significant growth in cross-border digital services, prompting countries worldwide to adapt their legislation to accommodate this trend. As these legislative changes are implemented rapidly, companies in this sector must be especially attentive. In some cases, the retrospective regularisation of operations can have significant financial implications for the company.
11. Organising events: Hosting conferences, exhibitions, or training sessions where entrance fees are charged can require VAT registration.

Understanding these triggers helps companies stay compliant and avoid potential penalties, which can be significant.

5. What Are VAT Registration Challenges Globally?

The VAT registration process can vary significantly across countries, making international VAT compliance a complex and sometimes burdensome task.

The complexity increases with globalisation and global trading activity, as companies may need to register for VAT in countries where they are not established or do not have a physical presence. As such, multinational companies face significant challenges today, particularly when it comes to VAT administrative responsibilities, which can vary widely across countries.

Companies encounter a variety of challenges when navigating the global tax landscape, such as:

• Identifying obligations: VAT rules differ significantly by country, and companies must accurately assess their responsibilities in each jurisdiction.
• Language barriers: Europe alone has 24 official languages, adding another layer of complexity when dealing with local tax authorities.
• Additional workload: Each country comes with its own set of VAT obligations, creating a big administrative burden.
• Risk of penalties: Noncompliance can lead to high penalties, interests, and legal repercussions for companies and, in some cases, for their legal representatives.
• Multiple VAT service providers: Many companies find themselves working with different VAT service providers in each country, further complicating their operations and day-to-day management.

6. What Is the Role of a VAT Agent or Fiscal Representative?

A VAT agent or a fiscal representative is an expert in different and complex tax regulations, has up-to-date knowledge, and has strong relationships with local tax authorities.

Both VAT agents and fiscal representatives act as the local liaison between companies and local tax authorities. They help companies identify the need to register for VAT in a given country, assist during the VAT registration process, and ensure proper filing of VAT returns and compliance with local tax laws.

While a VAT agent does not assume legal responsibility for the company’s tax liabilities, the fiscal representative often does. Fiscal representatives are frequently held jointly and severally liable for the company’s VAT obligations. Because of this liability, some countries require a bank guarantee or cash deposit to be provided upon registration, and the same is happening with entities acting as fiscal representatives in the countries where this is mandatory.

The requirement to appoint a fiscal representative varies by jurisdiction. For example, while a fiscal representative is mandatory for non-EU companies VAT-registered in France, it may not be required for EU-based companies. In the Netherlands, even EU-based companies must appoint a fiscal representative to benefit from the VAT deferment license for imports. Following Brexit, many EU countries now require UK companies to appoint a fiscal representative upon registration, increasing the need for this role.

At Ryan, we understand the complexities of the VAT registration processes and support companies with identifying the need for VAT registration, navigating the VAT registration process for the first time, and expanding operations into new jurisdictions. Our VAT experts either act as a VAT agent or a fiscal representative, guiding companies every step of the way.