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VAT registration threshold in the EU



Value Added Tax (VAT) is a VAT tax that applies to most goods and services sold in the European Union. VAT registration threshold is a VAT exemption limit for registering for VAT or VAT recovery, which varies from country to country within the EU. The VAT registration threshold has been established by the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added taxation.


In some EU countries VAT registration threshold may have an annual turnover limit as well as a certain number of VAT applicable transactions . In order not to exceed their VAT taxable transactions, small business operators must register for VAT as soon as they reach this limit. Therefore, it becomes difficult for them to know when to start with their VAT compliance.


VAT registration threshold in some European Union member states

The Council Directive 2006/112/EC of 28 November 2006 on the common system of value added taxation does not establish a VAT registration threshold, but each Member State is free to apply or not a VAT registration threshold for VAT taxable persons. In practice, some countries have VAT registration thresholds while others do not. The table below provides an overview of VAT registered entities in Europe.


In countries where VAT-registered businesses must file VAT returns every quarter rather than at year end (e.g., Italy), business owners can estimate their annual sales and then use that figure to determine whether they should register for VAT. VAT-registered businesses in countries where VAT returns are filed annually (e.g., France) must estimate their annual VAT taxable turnover and then use that figure to determine if they should register for VAT or not.

The VAT registration threshold, which has been established by the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added taxation , is one of the most important criteria to take into account when determining whether to become VAT -registered or not in each EU country. The table below lists the VAT registration threshold across various European Union member states according to Council Directive 2006/112/EC of 28 November 2006 on the common system for value added tax. The article also describes how VAT compliance procedures start once this limit has been exceeded.

The VAT registration threshold varies depending on VAT taxable transactions in each country. VAT-registered businesses must register for VAT once VAT taxable turnover exceeds the VAT registration threshold (and VAT exemptions no longer apply). VAT-exempt entities should also pay close attention to this limit, because they may need to start complying with VAT requirements if their deals get close to or exceed that point. VAT-registered businesses may be required to VAT compliance procedures once VAT taxable turnover reaches the VAT registration threshold. VAT-exempt entities should also pay close attention to this limit, because they may need to start complying with VAT requirements if their deals get close to or exceed that point.


VAT-exempt entities, VAT zero-rated supplies and VAT-registered businesses must become VAT compliant as soon as their VAT taxable turnover reaches the VAT registration threshold. VAT compliance procedures start once VAT taxable transactions exceed the VAT registration threshold.


However, a certain number of VAT taxable transactions may be required to determine whether a business has exceeded its VAT registration threshold. In some EU countries, the VAT registration threshold has an annual turnover limit as well as a certain number of applicable VAT transactions . In order not to exceed their VAT taxable transaction, small business operators must register for VAT as soon as they reach this limit. Therefore, it becomes difficult for them to know when to start with their VAT compliance.


In addition to monitoring turnover, there are additional factors that VAT taxable entities must check in order to determine whether VAT registration threshold has been reached. While VAT-registered businesses must register for VAT once VAT taxable turnover reaches the VAT registration threshold, VAT-exempt entities should also take into account any applicable VAT transactions. VAT zero-rated supplies must become VAT compliant as soon as they exceed their respective VAT registration thresholds.




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