everything you need to know about this tax

What is intra-community VAT?

Council Directive 2006/112/EC of 28 November defines  intra-Community VAT as a special system whereby the member countries of the European Union establish the rules relevant to foreign trade. 

In other words, it regulates the collection of Value Added Tax (VAT) on commercial transactions carried out between companies belonging to different countries within the EU. 

What is the function of intra-community VAT?

Foreign trade is a fundamental part of today’s economy, but each country collects taxes according to its own regulations. For this reason, there was a need to create a common system to facilitate commercial transactions between companies. 

By implementing common rules, transactions and VAT collection between EU member countries are greatly simplified. This also avoids double taxation and facilitates tax compliance for companies in each country. 

Differences between VAT and intra-community VAT

The  Spanish VAT (Value Added Tax) is an indirect tax levied on purchases of products or services and is applied in a unique way in each country. It is applied to practically all transactions, although with different tax rates. 

In this sense, intra-community VAT is a type of VAT that is specifically used for trade operations between countries of the European Union. In this case, the tax is collected only in the country of destination. 

How is intra-community VAT regulated? 

There are two laws that directly regulate the collection of this tax: 

• Council Directive 2006/112/EC of 28 November : this sets out the general and international rules for the collection of intra-Community VAT. 
• Law 37/1992, of December 28 : also known as the Value Added Tax Law, regulates the tax internally in Spain, as well as its application at the European level. 

Requirements for applying intra-community VAT

If your company carries out intra-community activities, then you must register with the ROI, that is, the  Register of Intra-Community Operators . This is the census where all the information on companies whose activities involve trade with other countries is gathered. 

Registering is relatively simple and can be done online or at any Tax Agency office. To do this, you must use  form 036 for the census declaration of registration or modification. 

There you must check the box corresponding to the application for registration in the ROI (box 582) and indicate the probable date of your first intra-community activity. Upon completing the process, you will receive a special tax identification number, called NIF IVA, with which other companies can check whether or not you are registered in the ROI. 

Documentation required for registration

Here we show you the documents you need to send to register in the ROI: 

• Form 036 : as we mentioned, you must check the box for registration in the ROI and provide information on the intra-community transactions you intend to carry out. This can be obtained through the Electronic Office of the Tax Agency.
• Company NIF : the tax identification number where your business data appears is required. 
• Electronic certificate : this is used when registering electronically and allows your company to be securely identified. 
• Deed of incorporation of the company : commercial companies must present this document to prove their legal existence. 
• Registration in the Commercial Registry : a copy of the registration certificate in said registry must be submitted. 
• Information on operations : documents must be submitted to prove the activities to be carried out, whether they are intra-community acquisitions, deliveries, provision of services, etc. 

These are the requirements for companies or corporations, while self-employed workers must also register in the Census of Economic Activities.

How long does it take to obtain intra-community VAT?

Once you complete the above process, the  Tax Agency will have up to three months to accept or deny your application. During this time, you may even receive a visit from a representative of the Tax Agency to assess your company or to request documents proving the existence of clients or suppliers from other member countries of the European Union. 

If accepted, you will be notified and the corresponding VAT ID will be assigned to you. However, if you do not receive a response, this means that the application was denied and you will not be able to issue or receive invoices exempt from intra-community VAT.

What is the VAT ID? 

Upon completion of your registration with the ROI, and if your application is accepted, you will receive an identification number known as NIF IVA. In Spain, this number consists of: 

• The prefix for Spain (ES);
• The Tax Identification Number (NIF) .

This number is used to identify all intra-community operations, facilitate tax control and simplify customs procedures. It should be noted that the VAT number is also used to verify whether a company is registered in the ROI or not. 

What is VIES? 

The  VIES  or VAT Information Exchange System is a database that compiles information from VAT records in the different countries of the European Union. In this sense, when you register in the ROI, your record is automatically created in the VIES and all the information is kept up to date. 

The VIES tool allows you to check whether a VAT number is valid and provides you with basic information about the operator. This helps prevent tax fraud and speed up customs procedures.

Intra-community VAT on transactions within the EU

It is important to know how intra-community trade transactions work, which are classified as acquisitions or deliveries. 

Acquisitions are operations where a company buys a product or service from another company located in another EU country. Delivery would therefore be when a company makes the sale of the product or service to another organization. That said, we can establish that: 

• Intra-community deliveries are exempt from VAT. This means that products transported from Spain do not have an impact on VAT on the invoice. 
• Intra-community acquisitions, such as the purchase of goods, are subject to VAT. 
• The provision of services in other countries of the European Union are also exempt from intra-community VAT. 

All economic activities that are subject to VAT are carried out through a “self-assessment” mechanism by which the operation is recorded in the model with the highest VAT incurred and the highest VAT charged. There are some exceptions that are mentioned in  articles 68 to 74 of Law 37/1992 .

Imports and exports

It is worth mentioning how Spanish VAT collection works on transactions carried out outside the EU, which are classified as imports and exports. 

The import of goods is subject to VAT, which will be charged at customs together with the corresponding tariffs. Exports, on the other hand, are exempt from VAT. 

In the case of services, if they are imported from another country, you must singapore email list charge VAT yourself, while in the case of exports, the service is located at the recipient’s headquarters and VAT generally does not have to be charged. 

Purchases and sales to individuals

This is a special case of intra-community VAT, since when transactions are carried  what is personalized email marketing and why is it so important? out with individuals who are considered final consumers, the tax is levied in the country of destination of the product or service. 

This procedure is only fulfilled when the threshold of 10,000 euros established for distance sales plus digital services provided to customers in other countries in the previous or current year is whatsapp number  exceeded.

Practical examples of intra-community operations

To better understand how intra-community VAT is applied, it is best to look at some examples: 

• A Spanish construction company purchases construction machinery from an Italian company. This qualifies as intra-community acquisitions, so the VAT must be settled by the company in Spain. 
• If a Spanish furniture manufacturer sells a batch of its products to a decoration store in France, we are talking about an intra-community delivery. If the requirements are met, it will not have to charge VAT on the invoice.
• Another case where a Spanish company hires a maintenance service for its servers, which will be carried out by a German company. This operation will be an intra-community acquisition and will be subject to Spanish VAT. 

What should you do before an intra-community operation? 

We must point out that before making any delivery, it is important that you check that the other company involved is registered in the ROI of its country. This way you will be able to issue a tax-exempt invoice.

With deliveries you also have to prove that the goods have been transported, so you need to keep the documents generated by the transport company. 

In the event of an acquisition, you will be responsible for sending your identification number (NIF VAT) to the other company, so that they can review your registration in the ROI.