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How VAT is applied across internal EU borders

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By Euronews
How VAT is applied across internal EU borders

<p>We’re talking tax in this edition of Utalk. Petar in Sofia asks: “I am a small business owner in Bulgaria, providing both goods and services to customers. I would like to extend my business abroad in the EU, but I am not sure whether <span class="caps">VAT</span> is applicable or not. Could you help me?”</p> <p>Jean-Baptiste Meert, a Senior Communication Officer with Europe Direct responds: “As a European Union-based company, <span class="caps">VAT</span> is chargeable on most of your sales and purchases, except exports to countries outside the EU. As a business supplying goods or services you must normally register with the tax authorities in the EU country where your business is established. </p> <p>“When you sell goods or services, add the <span class="caps">VAT</span> to the price of the goods or services on your invoice. The customer pays you the full amount of the invoice, including the <span class="caps">VAT</span>. You must account for this to the tax authorities. If you sell goods or services to business clients in other Member States, you will not have to charge <span class="caps">VAT</span> but your business client is, in most cases, liable to pay the <span class="caps">VAT</span> in his own Member State.</p> <p>“Similarly, when you are buying goods or services, you must also pay <span class="caps">VAT</span> as a customer. However, you can usually deduct that <span class="caps">VAT</span> from the <span class="caps">VAT</span> you charge your own customers. This means that you need to pay only the difference to the tax authorities, and report these amounts to them in your periodic <span class="caps">VAT</span> return. </p> <p>“Sometimes, the <span class="caps">VAT</span> your business has paid exceeds the <span class="caps">VAT</span> that you have charged to your customers. If so, the tax authorities will reimburse or credit you with the difference.</p> <p>“There are standard EU rules on <span class="caps">VAT</span>, but the detailed application of <span class="caps">VAT</span> may be different in each EU country. Although <span class="caps">VAT</span> is charged throughout the EU, each member country is responsible for setting its own rates. <br /> Within each country, there is a standard rate, which applies to all or most supplies, and there may be one or more reduced rates – lower rates that apply to a limited variety of supplies. </p> <p>“Finally, some important categories of goods or services, for example: educational, healthcare and financial services, are mostly exempt from <span class="caps">VAT</span>. </p> <p>For more information on <span class="caps">VAT</span> registration and invoicing, as well <span class="caps">VAT</span> rates in the various EU countries, call 00 800 6 7 8 9 10 11 or check out the website: http://europa.eu/youreurope/business/vat-customs/buy-sell/index_en.htm </p> <p>And if you would also like to ask a question on Utalk, click on the button below. </p>