Braunschweig, Germany
A Brand of Yalmans
Braunschweig, Germany
Tax Process

Sales Tax in
Europe Countries

Is the Sales Tax in the USA equivalent to the Value Added Tax (VAT)
applied across Europe?

While both VAT and Sales Tax are forms of indirect taxation, they differ in their collection methods.

Within the EU, when a vendor makes a sale, VAT is incorporated into the price. This implies that the end consumer acquires a product with the total VAT already included in the price at the time of purchase.

In the USA, when a vendor sells an item, the sales tax is not included in the listed price. The vendor adds the sales tax at the moment of the final consumer’s purchase. Consequently, the end consumer pays the product price along with the sales tax at the point of purchase.

How is Value Added Tax (VAT)

VAT is determined as a percentage of the total cost of a product or service. In this illustration, if a product or service costs the consumer €123 and the VAT rate is 23%, the vendor retains €100, and the collected €23 VAT is remitted to the tax office.

When is it necessary to register for a VAT number?

If you are importing and storing goods in an EU country, it is mandatory to register for a VAT number in that specific country. If your company is based in an EU member state, you or your tax representative can initiate the registration of your business for Value-Added Tax (VAT) with the local tax authority.

Is there more than one type of VAT Number to register for?

Yes, there are two types of VAT numbers that you can register for. A domestic VAT number is valid only for transactions within the country where the VAT number was issued. An Intra-EU (or inter-community) VAT number is for transactions across all other EU member states.

What are my VAT obligations?
Upon obtaining your VAT number and commencing sales to clients throughout the European Union, you are subject to VAT obligations in each country where you conduct sales. It’s important to note that Domestic VAT and Intra-EU VAT come with distinct compliance obligations. Every country in the European Union has its own requirements for VAT returns, featuring different regulations, deadlines, local languages, and local tax authorities. Furthermore, you are mandated to retain your original transaction documents for a period of six years.