New VAT regulations 2010 in Europe

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Corporate Services
Mentor Group Gold

Does anyone have any idea of how the new VAT regulations will affect a European business doing business in Europe.

So far I have been checking the net and found How VAT works - Taxation and Customs Union - European Commission

The European Comissions website don't give a clear answer on how this new VAT requirements are dealt with.

As what I know so far, every business must have a VAT number in order to send Invoices to a other business even though the other business is an oversea corporation.

Further I know that a European business will have to charge VAT regardless of the location of the company Invoiced, this also apply for overseas business - please correct me if I'm wrong.

We don't have a VAT number for our Cyprus company and therefore need to know how all this works.

I also found this link which is more useful than the above mentioned Legislation recently adopted - Taxation and Customs Union - European Commission

Finally I found a publication from Deloitte which is easier to read VAT 2010 in Europe

The changes to the VAT rules are designed to ensure that VAT on services accrues to the country where the services are used, and are part of a complex political compromise to obtain the support of Luxembourg, whose low VAT rate (15 percent) has made it a favored location for online business to consumer (B2C) service providers.
and here :

New place of supply rules for services
The new place of supply rules will make a sharp

distinction between services rendered to business clients

and those provided to private customers.

In order to allow service providers to distinguish

between these two categories, all recipients with a

VAT number are considered as business clients, even

if they also have a partial non-business activity (e.g.

public authorities). Business customers receiving services

exclusively for their own private use or the private use of

their staff will be treated as private customers. Also VAT

exempt businesses which do not charge VAT to their

clients, will be obliged to obtain a VAT registration if

they purchase services abroad.

New general rule for B2B

From 1 January 2010, new article 21 of the Belgian

VAT code will tax, as a general rule, services rendered

to business customers (B2B) at the place where the

customer is established and no longer at the place

where the supplier is established, as is currently the case.

It should be noted that services provided to both EU

and non-EU business clients will benefit from the new


Furthermore, a reverse charge mechanism will be

introduced for all services located in Belgium under

the general B2B rule (new article 51, §2, 1), obliging

customers to report the VAT due if the service provider

is not established in Belgium. Specific rules have been

devised in case the foreign service provider also has

an establishment in Belgium: the reverse charge only

applies if that establishment does not intervene in the

service, if it does, the provider should charge Belgian

VAT on their invoice.

A restricted list of clearly defined exceptions to this rule

will exist, most of them applicable in 2010 as well.

New general rule for B2C

Services provided to non business clients (B2C) will

continue to be located where the service provider is

established or have their establishment from where the

services are provided (new article 21bis of the Belgian

VAT code).

Apart from the services that receive particular VAT

treatment in B2B and B2C, there will be many more

exceptions to the rule in a B2C context. Overall this

results in a situation whereby after 2010 services

provided to non business customers will continue to

be taxed in the same way as before. This means that

services to non EU residents will largely continue to be

exempt from paying tax in the EU. A major change

will be made to cross border services to non business

customers within the EU as of 2015, when a range

of electronic and similar services will be taxed in the

country of the customer.

For ease of understanding, the current and future rules,

the most important changes are sumarized in the tabel

on the next pages.
source: Legislation recently adopted - Taxation and Customs Union - European Commission


I'm not sure about this will have to ask the tax department but so far it has been the case that you not charged the buying European company for VAT, if one did so and the company paid the VAT Invoiced it wasn't a big issue since one could just walk to the local VAT office and withdraw the VAT.

Recently those regulations have been changed, but in general the basic requriements still apply, only thing as I know is that now you HAVE to charge the VAT regardless the other businesses location, the company who was Invoiced VAT then need to get a VAT return from the local tax authority. Further as I remember, the reason for the changes are to avoid fraud with the VAT.


Corporate Services
Mentor Group Gold
I was wondering if you could legally avoid the tax if you bind up your entire business on a offshore structure which has a foundation for instant in Panama or the Seychelles parmount? Have been studieng all the different websites on google which pop up on tax savings and asset protection, found lots of stuff there...


Corporate Services
Mentor Group Gold
Elite Member
So I assume we all have to move offshore, means find a payment processor which accept companies outside of Europe and can transfer the money to an offshore/onshore bank account...


You will have to charge VAT now, regardless where the company is located as long as you are an European business.... thats the long arm of the European comission and all it's member countries.

See also the 2010 report here VAT 2010 in Europe

James Spader

Forum Moderator
Staff member
Elite Member
Welcome aboard lentak, please elaborate on the statement :

These VAT regulations are EU businesses killer.
I do not understand why you find it to be a business killer, if you know how things work within the EU it can be a advantage rather than a disadvantage :confused:


Offshore Agent
Admin said:
Welcome aboard lentak, please elaborate on the statement : I do not understand why you find it to be a business killer, if you know how things work within the EU it can be a advantage rather than a disadvantage :confused:
Why? Well...I'm selling online services to EU and also out of EU. If I sell service to EU business it's ok, I don't have to be registered for VAT (but customer has to be as he pays VAT at his country), if I sell service out of EU I have to register for VAT. Being registered for VAT is disadvantage for me - BIG TIME CONSUMING, higher prices, additional software etc... If I have a customer in other EU country who is not registered for VAT he cannot order service from me, otherwise he would need to register for VAT. Therefore it is better for him to buy services from a local company. With this I just lost a client.

This limiting me to sell services to non-VAT registered businesses and force me to be VAT registered if I sell out of EU. Correct me if I'm wrong.

James Spader

Forum Moderator
Staff member
Elite Member
True, if you primary sell to consumers, private people it may be a fact that your pricing can be way more competive if you can avoid the VAT (which is possible if you are selling from a company outside of the EU ie Seychelles, Belize, BVI, Panama etc.) however, if your primary customer base is EUR companies you will want to have a EU company for the trading this is of all parties involved interest in you can elimintae the VAT. Further don't forget that if you have an EU company you can also get the VAT on purchases back so you may be able to buy equipment and furnitures etc. way cheaper!


Corporate Services
Mentor Group Gold
Never charged VAT for my online sales, never faced any troubles all good:cool:


Corporate Services
Mentor Group Gold
Well! If you ask yes it came into force! If you ask if all are following the rules, the answer is no it never worked as intended ;)