VAT – Value Added Tax

Updated on July 19, 2022

Pay VAT in the country where you shop

As a private individual shopping in the EU, you should only pay VAT once, in the nation where you make your purchase.

You can bring home everything you buy in another EU country, without stopping at the border or completing a customs declaration. The only constraint is that your purchases must be for your own or your family’s personal use, and not meant for resale.

VAT refunds

Visitors from outside the EU are eligible to a VAT return on items purchased while in the EU if the products are shown to customs on departure together with the VAT refund documentation within 3 months of their purchase. In most cases, these are provided by the vendor, although the system is voluntary, thus not all merchants participate. Refunds in some countries are limited to purchases with a certain minimum amount.

Buying online from another EU country

Purchasing items from another EU countries and having them shipped to your country of residency is subject to additional regulations.

No VAT can be charged in the country where a firm is registered when it sells to your country and delivers items valued at or more than a specific amount.

As a result, they are required to charge VAT based on the country of destination rather than the country where the products are delivered.

All EU countries have a €10,000 barrier for cross-border online sales. This means that the VAT of destination rule must be applied by the majority of big online businesses shipping within the EU.

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The following is an example of a story.
You may have to pay a higher VAT rate at times.
Katrien, an internet shopper from the Netherlands, placed an order for a book from a major Irish retailer.

As soon as she entered her address and paid for the order, she realized that the price had risen. While investigating, she found that the corporation had applied a 10% Dutch VAT charge instead of 0% Irish VAT fee to her account.

To avoid paying Dutch VAT, exports must not exceed €10,000 in value.

Since the previous financial year’s sales totaled more than €10,000, any company that shipped goods to another EU country must apply the VAT rate of that country. In spite of the fact that her order is being transported from Ireland, the company that Katrien has ordered from routinely ships to the Netherlands and thus has to charge her Dutch VAT.

Second-hand goods, works of art, collector’s items, and antiquities are exempt from this law.

Excise duty

Excise duties are included in the price of any tobacco products or alcoholic beverages purchased online from another EU country, regardless of the quantity and even if the goods are being given as a gift.

All European Union countries have excise duties that must be paid by the trader.

Excise taxes will be reflected in these products’ prices, so be prepared for this.

Check with the vendor to be sure the duty has been paid if the price is really cheap.

Customs may take your products upon arrival if the seller failed to pay the excise charge, or you may be obliged to make the payment yourself. Ensure that the seller will pay the excise charge in the EU country of destination.

VAT, taxes, and excise duty are always owed when purchasing items online from outside the EU.

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VAT on telecommunications, broadcasting and electronic services

The same VAT laws apply to services like as telecommunications, television, and electronic media as they do to commodities.

Customers in other EU nations are taxed VAT if the company sells more than €10,000 worth of goods or services in a calendar year to such customers, regardless of the company’s location. Services acquired both inside and outside the European Union are subject to these rules.

Typical story: Senta, a Swede who frequently buys eBooks from an important Finnish online book vendor, pays VAT on digital content purchased in her place of residence. The Swedish VAT must be charged by the Finnish vendor.

Exceptions for other services bought online

Online purchases from an EU-based dealer are subject to VAT at the rate in force in that country.

Regardless of where you live in the European Union, this regulation applies.

The following is an example of a story.
VAT in the country where the business is located
Joao is the owner of a Lisbon-based consulting firm.

An individual living in Copenhagen has hired him to provide advisory services.

A consumer in Denmark who purchases a product from Joao’s business in Portugal will be charged VAT.

There are, however, numerous exceptions to this rule. The following are some of the more frequent exceptions:

The intermediary’s services: VAT is levied in the nation where the principal transaction with the intermediary occurs.

As an illustration, let’s say the owner of a French vacation cottage wants to transport some furniture to her home in Sweden and asks a third party to hire a removal firm to handle the job. When goods are transported between two EU countries, the principal supply (i.e. the transportation of commodities from one EU country to another) is made at the point of departure.
A property’s location determines which services it gets taxed for.

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As an illustration, imagine hiring a French architect to design a home in Spain.

Payment to the architect is subject to Spanish value-added tax (VAT).
Taxes on passenger transportation are calculated based on the route traveled.

Taxes in Poland, Germany, and France, based on the distance traveled, might be added to the cost of a bus ticket between Poland and France. There will be no EU VAT on the bus’s voyage through Switzerland, since Switzerland is not a member of the EU.
Services provided in restaurants and other food establishments are taxed at the location where the services are actually performed. As an example, let’s say that a company situated in Luxembourg provides the food and beverages for a Florence-based party. Italian VAT must be charged by the enterprise.
Please keep in mind that this is not a complete list.

Cars are an exception
VAT is paid in the country where you import and register your car if you buy a new car in another EU country (your country of residence). Large motorbikes, boats, and aircraft are all included in this new VAT regime.

When purchasing a vehicle in another EU country, learn more about the tax you’ll have to pay.

FAQs – VAT – Value Added Tax

Do I need to pay VAT on products I buy in another EU country?

YES. Duty-free shopping in airports, for example, is only available to non-EU citizens traveling outside the EU. Even while shopping in another EU country, EU citizens are required to pay VAT.