TVA Glossaire

13th Directive

A refund procedure for tax payers not established in The EU.  Reciprocity issues may prevent claims being made.

Acquisition

The receipt of goods by a taxable person from a supplier in another EU Member State where VAT is exempted by the supplier.

Acquisition Tax

The tax due on goods supplied intra EU. A procedure similar to the Reverse Charge applies to account for this tax.

Commodity Codes

A code assigned to a product or a group of products for the purposes of identifying it in international commerce or commerce in general. The code is an eight digit number specifically for exports coming from the EU, though it also can include goods moving within the EU. The commodity code is a ten digit number for imports from outside the EU. The commodity code allows you to look up things like the duty rates on the product that you are importing or things like any import or export restrictions.

Consignment Stock

Consignment stock is stock legally owned by one party, but held by another. Ownership of consignment stock is passed only when the stock is used (issued). Unused stock in a warehouse may be returned to the supplier. As ownership of consignment stock is not transferred until use, invoicing is not immediate. To account for a replenishment of consignment stock at a customer site, a manufacturer must credit inventory and debit customer consignment stock. Only after a customer actually uses the consignment stock may accounts payable be created.

Direct Attribution

Direct Attribution is one method for allocating costs in a Partial Exemption calculation.  It is used when the whole of a cost can be allocated to an exempt supply and, if that supply is exempt with credit then VAT recovery on the expense is maximised.

Distance Selling

Distance selling takes place when a VAT-registered business in one EU Member State supplies and delivers goods to a customer in another EU Member State who is not registered for VAT. Most commonly this will be sales to private individuals via mail order or internet trading. Distance selling only applies to goods, not services. If you are established outside the EU then any sales you make to the EU may not fall under distance sales for VAT purposes, but you may have obligations to be registered for VAT in the EU for other reasons.

EC Sales & Purchase Lists

EC Sales & Purchase Lists are reports that provide tax authorities with details of sales that were exempted of VAT by the supplier and where VAT may be due by the customer using Acquisition Tax. Unlike Intrastat reports, which monitor the movement of goods, EC Sales Lists report the supply of services that have been made cross-border, as well as all goods.

ERP Coding

Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Their purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.  ERP Coding is required to automate VAT calculation and reporting.

EU Member States

A member state of the European Union is a state that is party to treaties of the European Union (EU) and has thereby undertaken the privileges and obligations that EU membership entails. As of 2012 there are twenty-seven EU member states.

Before being allowed to join the EU, a state must fulfil the economic and political conditions generally known as the Copenhagen criteria. These basically require a candidate to have a democratic, free market government together with the corresponding freedoms and institutions, and respect the rule of law.

Fiscal Representation

A Fiscal Representative is a person, physically based in the country in which a business is trading, that is jointly and severally liable for the VAT owed by the business. It is no longer a requirement for EU businesses to appoint a Fiscal Representative when obtaining a registration in another EU Member State. However, the majority of EU member states do require non-EU businesses requiring a VAT registration to appoint a Fiscal Representative.

Intrastat

Intrastat reporting is a requirement for companies that trade across EU borders. It monitors the movement of goods between EU member states and the data collected enables EU countries to compile important trade statistics to monitor cross-border transactions.

Nature of Transaction Code

A Nature of Transaction Code (NoTC) is used to indicate the type of transaction which is being declared on the Supplementary Declaration (Intrastat). For example straight forward sales or acquisitions, goods sent for processing or free-of-charge goods.

Refund Directive

A procedure that enables EU taxable businesses to recover input VAT in Member States where they are not registered and where they cannot submit VAT Returns to deduct such VAT.

The Reverse Charge

A procedure that requires a recipient of goods or services to self account for the VAT on a transaction.  The taxpayer must “charge” himself VAT at the appropriate rate and then “deduct” the VAT on the same VAT Return according to the normal rules re deduction.

The Reverse Charge applies to the receipt of cross border intangible services and can also apply to the import of goods and the purchase services covered by an exception or the purchase of locally supplied goods where the supplier is not required to be VAT registered.

Shared Service Centres

A shared services centre is the entity responsible for the execution and the handling of specific operational tasks, such as accounting, human resources, payroll, IT, legal, compliance, purchasing, security.

Triangulation

Triangulation allows EU businesses to make intra-community trades in different countries, without the need to VAT register in each EU state. In a classic case of triangulation A supplies B, who in turn supplies C, but the goods move directly from A to C. Triangulation only occurs where there are three parties operating in different countries. To utilise this simplification, company A must clearly indicate on the invoice and EC Sales List that triangulation is applicable. Company C must in turn account for the VAT on its VAT return as an acquisition, rather than as a domestic supply.  The trade is also reported through Intrastat as a movement between AC and B – thus excluding BA from the reporting.

VAT

An Indirect tax levied on consumption and ultimately paid by the final consumer of a good or service.

VAT Numbers

A VAT number – or value added tax identification number or VAT identification number (VATIN) – is an identifier used in many countries, including the countries of the European Union, for value added tax purposes. In the EU, a VAT identification number can be verified online at the EU’s official VIESwebsite, it confirms that the number is currently allocated and can provide the name or other identifying details of the entity to whom the identifier has been allocated.

VAT Registrations

VAT Registrations enable businesses to charge and recover appropriate local VAT where applicable for their business. In some countries, thresholds may be in place so that a VAT Registration is only necessary once the turnover exceeds an annual limit, but in many EU countries there are no thresholds for VAT Registration – it is essential that businesses consult local VAT legislation to establish if they have a requirement to obtain a VAT Registration.

VAT Returns

A regular report of sales and services subject to VAT which is required of firms registered for VAT.

VAT Thresholds

You must register for VAT if your VAT taxable turnover for the previous 12 months is more than the figure that the EU Member State in which you are trading stipulates. This figure is known as the VAT registration threshold. The threshold changes – usually once a year announced in the Budget – so you should regularly check your turnover against the current threshold.

Warehousing

A tax warehouse is an authorised place where goods subject to Excise Duty are produced, processed, held, received or dispatched under duty suspension arrangements by an authorised warehouse keeper in the course of their business.

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