Most European Union countries have slowly switched to VAT or value added tax on goods and services, along with order to comply with a common code all eu countries that follow vat have to follow vat eu directives. These directives are amended regularly in a bid to further fine tune the system in order to avoid tax leaks and make sure better co-operation among states in collecting and refunding vat.
The European Union through its website ec.europa.eu tries 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 moved to vat check the system of vat tax in a bid to improve tax revenues and also to plug tax holes that were previously draining precious resources. Each vat enabled country possesses its own interpretation of european vat or europa vat rules that might vary slightly but are almost similar in principle.
For instance, 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 following vat collected by 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 linked to customs duties, excise and vat in the UK. Similarly, a trader in Poland would need 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 over Europe usually have to hire a vat agent or vat consultant to assist file vat returns regularly. These agents need to be experts in interpreting vat eu rules and vat rules applicable in their own country. For example, a UK trader with vat registration has to appoint a vat agent that may be conversant with uk vat rules. If that trader imports goods from other vat countries in Europe which have already charged vat on the same then the vat agent of this trader will be able to apply for vat refund so as to reclaim vat back. This process is pretty lengthy but can help European traders recover vat amounts previously paid, which inturn can lower their costs and enhance their cash flow.
The europa website tries to educate all vat enabled eu countries to adhere to a standard system of vat in order to decrease friction among states as a result of varying vat rates on similar goods or services. Several European countries too have come with their very own amendments while they attempt to adapt completely to eu vat directives for better vat compliance in their country and across borders too.
The move of shifting to vat has benefited various European countries as they have witnessed higher revenue collections over time. However, in a bid to make sure better co-operation between states, vat eu directives and amendments from the EU Commission are making constant efforts to further improve the system of collecting and refunding vat.