Within the European Union, business relationships between European companies are characterized by simplicity. Nevertheless, certain steps must be taken.
The principle of promoting the free movement of people and goods has guided European integration since the beginning. “Thus it is this principle that governs commercial relations between European companies, the objective being to promote trade within the Union’s borders in order to strengthen its economy,” notes Matthieu Hanachowicz, a partner with AHA Expertises & Conseils, which is a member of France Défi (the leading French group of independent accountants and auditors) and PrimeGlobal, the 3rd largest international accounting association, with more than 300 firms in over 80 countries.
In short, simplicity is the key for business leaders partnering with a European counterpart, whether it is a customer or a supplier, the exchange of services or goods. For goods, for example, no customs clearance is required, thus avoiding the need to use a freight forwarder and pay taxes.
The essential intra-Community VAT number
However, some formalities are required. What is the first? Getting an intra-Community VAT number. “It is mandatory even for businesses that are not subject to VAT, such as micro-companies. It is issued free of charge by the tax authorities to any company upon request,” explains Matthieu Hanachowicz. It is also recommended that businesses check the validity of the numbers provided by potential European partners. “This is a way of benefiting from the particularly favorable tax regulations governing intra-Community trade,” emphasizes Matthieu Hanachowicz. Nothing could be easier, since you just go to the VAT Information Exchange System (VIES) website to check it. This European Commission search engine, which is accessible free of charge, lists the intra-Community VAT numbers of every company in the EU countries.
VAT subject to the reverse charge system
The volume of trade may also require some additional formalities. “Whether it is a supplier or a seller, a French company must make an electronic trade of goods declaration (DEB/Intrastat). This is simplified when the value of the transactions is less than €460,000, and detailed when it is more. But these declarations are primarily statistical in nature, making it possible to quantify intra-Community trade,” says Matthieu Hanachowicz. When the transaction involves a service provided by a French company to a European customer, however, it must be reported to the customs administration, regardless of the amount, with a European declaration of services (DES). And the VAT? It is part of a reverse charge system. In other words, the seller or supplier invoices without tax and therefore does not collect VAT. It is up to the customer to report it. This rule applies to every country in the European Union.
– Jean-Marc Engelhard, Accroche Press’ for France Défi.
Compliments of AHA - Matthieu Hanachowicz, in charge of International Development
AHA Expertises & Conseils has been in the public accountancy and auditing business for over 30 years. AHA operates out of 5 offices providing local service coverage throughout the Rhône, Loire and Isère departments. They are a 100 collaborators and 6 partners, public accountants and statutory auditors. The group is a member of France Défi, the largest French association of independent public accountants and Prime Global international association.