Most European Union countries have slowly switched over to VAT or value added tax on services and goods, along with order to comply with a common code all eu countries that follow vat need to follow vat eu directives. These directives are amended regularly in a bid to further optimize the system in order to avoid tax leaks and ensure better co-operation among member countries in collecting and refunding vat.
The European Union through its website ec.europa.eu attempts to educate member countries and vat registered traders in various countries on some of the regulations that apply on current and future vat rates and refunds. Several countries in Europe including the UK, Sweden, Poland, Greece, Germany, Italy, etc have slowly moved to the system of vat tax in a bid to improve tax revenues as well as plug tax holes vatvalidation.com/vat which were previously draining precious resources. Each vat enabled country possesses its own interpretation of european vat or europa vat rules that might vary slightly but they are almost similar in principle.
For instance, in the United Kingdom a trader that has crossed across the vat threshold limit will have to turn into a vat registered trader before issuing any vat invoice. The subsequent vat collected from the trader is then adjusted against any vat paid and the difference is paid to HM Revenue and Customs or hmrc vat department that looks after all issues linked to customs duties, excise and vat in the United Kingdom. Similarly, a trader in Poland would need to issue a faktura invoice, which essence is a vat invoice but in Polish language, and pay vat to the relevant vat department in the country.
Since each country has adopted vat in a slightly different manner by applying varying vat rates to similar products, traders all over Europe usually have to hire a vat agent or vat consultant to assist file vat returns regularly. These agents need to be experts in interpreting vat eu rules and vat rules applicable in their country. For example, a UK trader with vat registration needs to appoint a vat agent that is conversant with uk vat rules. In the event that trader imports goods from other vat european countries that have already charged vat on the same then the vat agent of that trader will be able to apply for vat refund in order to reclaim vat back. This method is pretty lengthy but could help European traders recover vat amounts previously paid, which inturn can lower their costs and improve their cash flow.
The europa website attempts to educate all vat enabled eu countries to follow a common system of vat in order to decrease friction among member countries as a result of varying vat rates on similar goods or services. Several countries in Europe too have come up with their own amendments while they try to adapt completely to eu vat directives for better vat compliance in their own country and across borders too.
The move of shifting to vat has benefited various countries in Europe as they have witnessed higher revenue collections over the years. However, in a bid to make sure better co-operation between states, vat eu directives and amendments from the EU Commission are making constant efforts to improve the system of collecting and refunding vat.