Most European Union countries have slowly switched over to VAT or value added tax on services and goods, along with order to abide by a common code all eu countries that follow vat have to follow vat eu directives. These directives are amended regularly in a bid to further optimize the system so as to avoid tax leaks and make sure better co-operation among states in collecting and refunding vat.
The European countries through its website ec.europa.eu tries to educate member countries and vat registered traders in a variety of 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 shifted to vat check the system of vat tax in a bid to improve tax revenues as well as plug tax holes which were previously draining precious resources. Each vat enabled country possesses its own interpretation of european vat or europa vat rules that may vary slightly but they are almost similar in principle.
For instance, in the United Kingdom a trader which has crossed over the vat threshold limit will have to turn into a vat registered trader before issuing any vat invoice. The subsequent vat collected by the trader is then adjusted against any vat paid as well as 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 UK. Similarly, a trader in Poland would need to issue a faktura invoice, which essence is really a vat invoice however 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 through the use of varying vat rates to similar products, traders all across 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 own country. For example, a UK trader with vat registration has 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 a vat agent of that trader will be able to apply for vat refund so as to reclaim vat back. This process is pretty lengthy but can help European traders recover vat amounts previously paid, which inturn can lower their costs and enhance their income.
The europa website tries to educate all vat enabled eu countries to adhere to a standard system of vat in order to decrease friction among member countries due to varying vat rates on similar goods or services. Several European countries too have come up with their very own amendments while they attempt 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 European countries as they have witnessed higher revenue collections over the years. However, in a bid to ensure better co-operation between states, vat eu directives and amendments issued by the European Commission are making constant efforts to improve the system of collecting and refunding vat.