VAT rules for business purchases within or outside the EU
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Do you have to pay VAT if you buy goods or services abroad for your business? And is there a difference between buying something within or outside the EU? Find out which VAT rules you need to keep in mind when making your next international purchase.
Business purchases within the EU
When you purchase goods or services in another EU country, the VAT is usually ‘reverse charged’. But what does this mean? Under this reverse charge mechanism, the seller doesn’t charge VAT, but you, the buyer, have to declare, deduct and pay the VAT yourself in your own VAT return. In almost all cases, this is a zero operation.
Exceptions for certain services
For some services, you need to pay the VAT applicable in the service provider’s country. This is the case for services that are related to:
- real estate
- admission to events in the areas of culture, art, sport, science, entertainment or education
- short-term vehicle rental
- passenger transport
- food services (i.e. restaurants or catering).
Business purchases outside the EU
When you purchase services from a supplier outside the EU, the reverse charge mechanism usually also applies: you pay the VAT applicable in your home country.
VAT on imported goods
If you’re buying goods from a supplier outside the EU, then you usually pay the VAT applicable in the country where the goods enter the EU. You pay the VAT to the relevant country’s tax authorities and also file a declaration there.
Import VAT is calculated based on the customs value of the goods. In some situations, there are other things to consider too. If you have any questions about this, you can always ask one of our partner accountants.
In both cases, you can later recover the VAT in your own VAT return.
What does VAT reverse charge mean?
If a foreign supplier implements the VAT reverse charge mechanism, they mention this on their invoice and charge VAT at 0%. It is then up to you, the buyer, to calculate and indicate in your VAT return how much Belgian VAT you need to pay. You can then deduct that VAT amount in your VAT return.
Read more about the VAT reverse charge.
Always provide your VAT number
When making a purchase abroad, always remember to provide your VAT number. This way, you avoid your supplier charging you foreign VAT.
Are you exempt from VAT because of your profession or because your turnover is less than €25,000? If so, make sure your supplier knows this, as the reverse charge mechanism can’t be used in this case.
Have you mistakenly received an invoice where foreign VAT has been charged? Then unfortunately that VAT can’t be recovered via your VAT return. You can, however, ask the supplier to send a corrected invoice.
The VAT regime is quite complex, to say the least. Do you want to make sure you’re complying with the applicable international VAT rules? Accountable ensures your invoices meet the legal requirements and references them correctly in your VAT return.
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