The Value Added Tax (VAT) is a general consumption tax assessed on the value added to a good or service.
This tax affects the final price of the product or service and is payable by the final consumer. The tax is then paid by the consumer as part of the product price, collected by the selling company, and then refunded to the State. The VAT payment is different whether the trading exchange occurs within the European Union or between a member of the EU and a non-member State.
Transactions between a non-European member and a member of the UE
When importing a good from a non-European member State, it is subject to VAT at the rate applicable in the member State into which the goods are imported. VAT is generally charged at the border, at the same time as customs duty.
No frontier controls exist between Member States and therefore VAT on goods traded between merchants belonging to a EU member State is not collected. The VAT due for the acquisition of the product is payable on acquisition of the goods by the final customer in the member State where the goods is purchased.
How to beneficiate of this VAT exemption?
First, when starting your company in Spain, this will be assigned a CIF (Código de Identificatión Fiscal): this Spanish tax identification number corresponds to the European VAT number. Once you get this number, your company can start doing trade. If the transaction you make occurs with another company, within the European Community, you do not have to include the VAT in your bills or you do not have to pay the VAT if you are the purchaser.
Then, be sure to provide your VAT number before the transaction or to ask your client to give you his EU VAT number when you place an order!
Our consultancy company located in Barcelona, TAS Consultoria, offers accountancy assistance to help you with our daily business running. We deal with all your accountancy requirements and procedures, as well as your VAT balance sheet. For further information, contact us !