Most EU 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 have to follow vat eu directives. These directives are amended regularly in a bid to further fine tune the system in order to avoid tax leaks and ensure better co-operation among states in collecting and refunding vat.
The European countries through its website ec.europa.eu attempts to educate states 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 vat check the system of vat tax in a bid to raise 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 UK a trader that 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 from 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 connected to customs duties, excise and vat in the United Kingdom. Similarly, a trader in Poland would have to issue a faktura invoice, which essence is a vat invoice but in Polish language, and pay vat to the relevant vat department in that country.
Since each country has adopted vat in a slightly different manner by applying 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 country. For instance, 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 which have already charged vat on the same then a vat agent of that trader should be able to apply for vat refund so as to reclaim vat back. This method is pretty lengthy but could help European traders recover vat amounts previously paid, which in turn can lower their costs and enhance their cash flow.
The europa website tries to educate all vat enabled eu countries to follow a common system of vat so as to decrease friction among member countries as a result of varying vat rates on similar services or goods. Several countries in Europe too have come with their very own amendments as they attempt to adapt completely to eu vat directives for better vat compliance in their country and across borders too.
The move of shifting to vat has benefited various countries in Europe since they have witnessed higher revenue collections over time. However, in a bid to ensure better co-operation between states, vat eu directives and amendments issued by the EU Commission are making constant efforts to further improve the system of collecting and refunding vat.