An increasing number of SMEs are deciding to take the path of internationalization, although most consider it more difficult than it was three years ago. However, even when they consider it difficult, they recognize their ability to boost their business growth to other EU countries, streamlining intra-EU operations. Want to know how to trade in the EU and succeed? Here we tell you all about it!
What are intra-community transactions?
Let’s explain it simply: intra-community operations are all those activities that you carry out with clients outside Spain, but who belong to the European Union, since their administrations are connected to exchange and verify information.
When as a self-employed person or company you sell or buy something to another member country, you are carrying out what is called an intra-community operation, which is subject to certain regulations, tax obligations and requirements.
Types of intra-community transactions
The type of intra-community operation can be determined according to the type of transaction executed. In this sense, these can be divided into:
Intracommunity supply of goods and services
In this type of operation it is your company that exports products or provides services to the other country, whether you sell directly to the consumer or trade with a company.
In these cases, the operation is exempt from VAT declarations, attributing the right to deduct the input VAT of these acquisitions of goods and services that affect this activity.
Intra-community acquisition of goods and services
Intracommunity acquisition involves the import of products or the contracting of services from a company belonging to a country belonging to the European Union.
With regard to this type, purchases are made by one businessman to another businessman and the VAT is settled on a general basis, as detailed in Form 303 where the acquirer declares the Spanish VAT accrued on the transaction which, at the same time, will confirm that the established requirements were met.
You may also be interested in: What is an Intra-Community VAT number?
How is VAT applied to intra-Community transactions?
As a general rule, intra-Community transactions are exempt from paying VAT, since they are taxed in the country to which they are destined. However, the supplier of origin needs to justify the non-application of intra-Community VAT and the application of this exemption. He needs to prove that the services rendered or the goods shipped are destined for a country that is part of the community.
For this reason, it is necessary that the two participating companies have the Intracommunity Operator Number or the Intracommunity NIF and are registered in the VIES census.
If one of the parties does not have an intra-community VAT number, this does not prevent it from carrying out operations with other countries belonging to the European Union. However, the tax treatment will apply differently. That said, if you are considering exporting or importing to another country on a regular basis, it is in your best interest to have all your documentation in order.
In that sense, if your company is the one issuing the invoices, different scenarios may arise:
Both companies have an intracommunity VAT number.
If this is the case, you must issue the invoice to your customer free of VAT. However, you will have to reflect the operation in the Form 303, the form of the quarterly VAT declaration, and in the Form 349 of Recapitulative Declaration of Intracommunity Operations.
The latter is merely informative, since the Tax Agency will also receive it from your client and will compare it with yours to verify that the attached data match.
If your customer does not have an intra-community VAT number
If this is the case, you will have to issue an invoice with VAT which your client will pay and, at the end of the semester, you will have to settle it through a Form 303.
If you do not have an intracommunity VAT number, but your customer does.
If so, you will have to issue a VAT invoice that your customer must pay and then settle at the end of the semester.
If none of the parties has an intra-community TIN
You will have to apply the VAT on the invoice so that you can settle it at the end of the semester.
This is an intra-community acquisition
This means that it is your company that receives the invoice because it has contracted a service or purchased a product from another company belonging to an EU country. In this scenario, the rules are the same. Also, if both parties have an intra-community VAT number, you will not have to pay VAT in their country.
In all other cases, you must pay the VAT applicable to your supplier’s country.
If you want to recover the VAT you paid within the European Union
To do so, you must submit Form 360 for the management of returns to professionals and entrepreneurs. You must indicate the supplier’s data, the invoice and comply with a series of requirements, such as having an electronic certificate and being registered in the Enabled Electronic Address.
You may also be interested in: Basic guide to importing to Spain
What do you have to do to become an intra-EU trader and trade in the EU?
If you want to start carrying out your own intra-community operations, you must first register in the Register of Intra-Community Operations (ROI) in order to apply for your European intra-community NIF, the special number with which you will be able to carry out your operations.
This number must be requested through the Tax Authorities’ Census Form 036 and it is possible that the larger the company requesting the registration, the longer it will take due to all the checks that the Tax Authorities must carry out to detect and prevent frauds that usually occur in this type of operations.
On the other hand, if it is an SME or a self-employed person who wishes to export to a neighboring country of the European Union, he/she must check that his/her client is registered in the ROI. If not, the VAT must be applied to the corresponding invoice in Spain.
If the SME or self-employed person wants to import and receive the invoice without VAT, you must let the supplier know the intra-community VAT number so that he can check it in his country.
It is important to know that you should keep the documents of the curriers that were paid in order to be able to justify in the future that these exports or imports were made.
You may also be interested in: How to have an international e-commerce?
How should you invoice customers in the European Union?
When issuing an invoice you should pay attention to some aspects, especially if you are going to offer services or sell products to customers abroad and who are also part of the European Union community. For example:
Where it resides.
What type of customer you are.
What you are going to bill.
Where the delivery is to be made, especially if it is to be made in the destination country.
If the product or service to be delivered directly influences the tax treatment of the invoice to be made (specifically the VAT treatment).
But, the most important question is: should you do it with VAT or without VAT? Here are some possible answers.
1. Invoicing an intra-community operation
The first thing to consider is whether your customer is inside or outside the EU borders. If it is the first case, we will be talking about intra-community operations and it is important for you to know that the tax treatment of these operations varies depending on whether it is a company, a professional or a private customer.
Another aspect that is important not to forget is whether the intracommunity operation consists of the rendering of services or the delivery of goods. In that sense, depending on the scenario the following would apply:
2. Invoicing to foreign professionals or companies in the European Union
After requesting your registration in the ROI, you will be provided with your NIF-VAT number with which you can carry out the operations you wish, knowing that you must declare them through Form 349 (monthly or quarterly) and also in Form 303 and Form 390 of VAT (the annual summary form).
If what you will invoice is a service, the invoices you issue are not subject to VAT, as long as you and your client appear in the ROI as intracommunity operators. Of course, you should be aware if any of the above mentioned scenarios arise.
However, if you invoice any goods, the invoices will be exempt from VAT, indicating the condition of the invoice.
3. Invoicing foreign private customers in the European Union
Invoicing this type of customers means a change in the tax treatment. In addition, it is also necessary to distinguish between the provision of a service or the delivery of goods.
In this case, if what you will invoice is the provision of services to a private customer, this must be taxed in the country of origin (in this case, Spain) as if it were a domestic transaction. Therefore, you will have to reflect the sale in the VAT Form 303, as well as in the Form 390.
If you issue an invoice for an electronic service to a private individual within the EU, the invoice must include the VAT of your customer’s country.
On the other hand, if what you need to invoice is the delivery of a good and this exceeds the threshold of 10,000 euros in the amount of digital services to end consumers, this will be taxed in the country of destination.
Intra-community operations will not only allow you to increase your customer base, they are also a great opportunity to grow your business internationally. If you are thinking of trading in the European Union and do not know where to start, TAS Consulting can help. You only need to contact us through our website or our email email@example.com and our experts in finding the best for your company will be happy to assist you.