What is VAT?
VAT (Value-Added Tax): VAT is a type consumption tax that applied on goods and services at very stage of production or distribution. TO put it more simply, this tax is levied on added value of goods or products that are used/obtained during the different steps in product/supply chain manufacturing. In the UK and EU, every time you sell a product or service you are possibly required to collect VAT from your customers which must then be given back by remitted this tax to the appropriate authority.
When VAT Registration is Required
VAT registration: what is the point? Picture attempting to sell goods in a new market without following the local rules; it would end badly, right? As well being a legal requirement, VAT registration is also the best way of ensuring your business will run smoothly in UK or EU. You can also save money by being able to claim back the VAT which you pay on your business-related expenses.
But… Who Needs to Register for VAT?
Not every business will need to register for VAT straightaway. For any company outside of the UK (or EU) selling goods or services in to it, then consideration will need to be given as whether VAT registration is required. In general if your taxable turnover is above £85,000 within a 12 month period you need to VAT register. But, if you do not reach the threshold sometimes it is good to register voluntarily.
VAT Thresholds Explained
EU wide and UK VAT threshold for each country It is the level of turnover (normally in a 12 month period) over and above which you must account for VAT. Take the VAT limit, which is £85K in UK as an example. If your business goes over this limit for taxable turnover, then you need to register for VAT. You should of course verify the actual thresholds for each country where you intend to offer your services.
Register for VAT if you're non-established
In this article, we detail how to register for VAT as a non-UK or EU based business. This process may vary in different countries but on average, you will have to do these steps.
Find your correct VAT authority: The one in the country where you are going to sell product, service.
Document your documents: Proof of business registration, operational info, and details about directors or shareholders are always must haves.
Apply: This can usually be done online but some countries require physical documentation.
Wait for a decision: The letter will contain your VAT registration number, which you need to put on invoices and in other communications about the VAt tax-Government of United Kingdom-Site
Requisite documents for VAT Registration
You have to provide certain paperwork for the tax authorities when registering for VAT. These usually include:
Copy of Certificate of Incorporation: This is the most important as it tells us that your company exists.
Proof of trade: copies of invoices and contracts to prove your business works. Passport or similar identification documents for a company director.
Bank statements: this shows you have financial activity.
If required, make sure that all of your documents are translated into the country's national language where you apply
Free guidance: How to VAT REGISTER
The process of VAT registration depends on which country you live in, however it usually consists of such steps:
Collect all essential papers, as stated above.
Fill in the VAT registration form: This is usually available on the relevant tax authority’s website and you can generally do this online.
Send the form and documents: lodge your completed form (and supporting documents) by email or post.
Get your VAT number: As soon as your registration is completed, you will receive a unique identification to add on invoices and taxes.
Behave like a VAT-registered business: If you are not already charging VAT on your sales, should start doing so now while making sure that accurate records of all their transactions can be maintained.
Post VAT Compliance Post-registration
If you are registered, compliance is mandatory. This involves:
VAT returns: Normally quarterly, but this may vary.
Maintaining a full set of records meaning invoices, receipts, and VAT returnsMake VAT Payment on time: Delay in payment late -payment fees.
VAT compliance is akin to having a car. As with any rules based system regular maintenance keep everything in tip-top condition and provide you ensure that is money wisely spent on fines rather than repairs.
Penalties for Non-Compliance
Offending status VAT bodies tax fraudnoinspection Reduced Desktop Site] Whether you are caught by the prying eyes of justice offending to check back on which may incur very heavy penalties if not in compliance with this article. Non-compliance can lead to anything from fines up through legal action if the non-compliance is severe. If you are more than a few days late filing your VAT return, then by failing to do so, as HMRC may decide if the tax goes unpaid their penalty can be in the form of percentage based on an portion of that unpaid VAT while deliberately not paying any money is fraud.
Issues in Registering for VAT
As an else party registering for VAT may be quite complicated as well. Common challenges include:
One of the biggest hurdles to filing an interim disaster assistance SBA loan application is, well…. the language!
Layers of documentation processes: Countries have different requirements as far as what they want, and how long it has to be saved.
Slow processing: VAT registrations are not immediate and different tax authorities may require varying time to process applications.
Getting through these obstacles often means meticulous planning and sometimes the advice of a professional.
Benefits of VAT Registration
But as painful as the VAT registration process can be, there are advantages…
Credibility: VAT registration can add some legitimacy to your business.
Reclaim VAT: You can reclaim the tax levied on your business expenses to increase the money you earn.
Market access: Some markets and series on which trading occurred require being VAT-registered.
Hiring a VAT Expert
It is advisable to hire the services of a VAT expert as tax registration can be challenging, especially for foreign companies. They can help you through the process from end to end, get your documentation in place and make sure that whatever is being done stays within laws of the land.
