Most European Union countries have slowly switched over to VAT or value added tax on goods and services, and in order to comply with a standard code all eu countries that follow vat need to follow vat eu directives. These directives are amended regularly in a bid to help optimize the system so as to avoid tax leaks and ensure better co-operation among member countries in collecting and refunding vat.
The European countries through its website ec.europa.eu attempts to educate member countries and vat registered traders in various countries on a number of regulations that apply on current and future vat rates and refunds. Several countries in Europe including the UK, Sweden, Poland, Greece, Germany, Italy, etc have slowly shifted to the system of vat tax in a bid to raise tax revenues and also to plug tax holes www.vatvalidation.com/vat which were previously draining precious resources. Each vat enabled country possesses its own interpretation of european vat or europa vat rules that may vary slightly but they are almost similar in principle.
For example, in the UK a trader that has crossed across the vat threshold limit will need to turn into a vat registered trader before issuing any vat invoice. The subsequent vat collected from the trader will then be adjusted against any vat paid as well as the difference is paid to HM Revenue and Customs or hmrc vat department that looks after all issues connected to customs duties, excise and vat in the UK. Similarly, a trader in Poland would have to issue a faktura invoice, which essence is a vat invoice however in Polish language, and pay vat to the relevant vat department in the country.
Since each country has adopted vat in a slightly different manner by applying varying vat rates to similar products, traders all across Europe usually have to hire a vat agent or vat consultant to help file vat returns regularly. These agents need to be experts in interpreting vat eu rules and vat rules applicable in their country. For instance, a UK trader with vat registration has to appoint a vat agent that is conversant with uk vat rules. In the event that trader imports goods from other vat countries in Europe that have already charged vat on the same then the vat agent of that trader should be able to apply for vat refund in order to reclaim vat back. This method is pretty lengthy but can help European traders recover vat amounts previously paid, which inturn can lower their costs and improve their cash flow.
The europa website tries to educate all vat enabled eu countries to adhere to a common system of vat in order to decrease friction among member countries due to varying vat rates on similar goods or services. Several European countries too have come with their own amendments as they attempt to adapt completely to eu vat directives for better vat compliance in their own country and across borders too.
The move of shifting to vat has benefited various countries in Europe as they have witnessed higher revenue collections over the years. However, in a bid to make sure better co-operation between states, vat eu directives and amendments from the EU Commission have made constant efforts to improve the system of collecting and refunding vat.