Other than corporate income tax, value added tax also known as VAT applies to business entities in the country. It is charged on the sales of goods and services rendered. When a company carries out business activities within the territory such as importing, selling, or storing goods, it is obligated to meet all tax obligations set up by the authorities. Registering for VAT is one of such obligations that every business must meet. Failure to register on time may attract unwanted fines and penalties. Aside from registering, every company must file periodic returns either monthly or quarterly as well as pay the due VAT.
If you are interested in setting up a business here, you must know how it works. This guide provides basic information on the tax.
Types of Value Added Tax (VAT) Rates
As with most countries, there are three rates charged by the tax authorities. Some taxable goods are subject to the standard VAT rate of 24 percent, an intermediary rate of 14 percent applies to certain goods such as foodstuffs, while the reduced rate of 10 percent is charged on certain services.
VAT Registration
All businesses must register and apply to the number as this is a mandatory act when doing business in the country. This process is quite simple and only requires filing the application form and submitting the required documents. The tax number is then issued after a month. This number is useful for tax purposes related to value-added tax.
Registration Threshold
When a corporation exceeds certain thresholds, it must file an Intrastat statement before the 10th day of the succeeding month. The thresholds available in the state are:
- Arrivals: EUR 700,000
- Shipments: EUR 700,000
Processing Time
After the submission of all required documents, it takes one month for the tax office to issue the VAT number, provided the documents are accurate and satisfy the requirements of the tax authorities.
Documents Required
For quick processing, the following documents must be submitted during the registration:
- A Completed registration form
- Extract from the trade register
- Proof of activity within its territory
- A certificate of VAT liability
- Power of attorney (if necessary)
- Copy of Articles of Association, etc.
Hiring A Fiscal Representative
Businesses owned by Europeans existing locally or abroad do not require the services of fiscal representatives to stand in for them during tax registration. This way, they are liable for the VAT they owe. However, companies by non-EU nationals must hire fiscal agents from a local to represent them and meet tax obligations in the country. The company is liable for the VAT debts owed by the entities it represents.
Filing VAT Returns
A company must file periodic VAT returns monthly. A business owner can choose the quarterly reporting basis if the annual turnover of the former calendar year is below € 100.000. The annual reporting period is also possible if the company’s annual turnover does not exceed € 30.000. Returns must be filed online by the 12th day of the second month after the tax period. However, if the reporting frequency is annual, the due date is the 28th of February of the following year. VAT must be paid along with the filing of the tax return.
VAT Penalties
Every company with a business within this territory needs to pay VAT and fill returns. Companies that fail to meet this obligation must pay a fine or face penalties. Tax authorities can ask a business to pay fines for registering late for VAT. Or for missing the deadline for returns filing.
