Before we discuss why the EU has announced new VAT changes for 2021, let’s quickly review what VAT is.
Value Added Tax (VAT) is a consumption tax on goods and services. It’s a flat tax that applies to anyone who buys something, rather than other forms of tax, such as income-based income taxes. VAT is levied in over 160 countries and, as you can probably guess, it is most prevalent in the European Union.
In the European Union, each country has its own VAT rate.
Reasons for changing VAT rules in the EU
There are several key reasons why the EU has decided to change the way VAT works.
Simplify Vat in All Member States
Things can get a little confusing when you manage, register and charge separate VAT in 27 countries. The 2021 merger will greatly Pastors Email List in The US simplify the VAT process for governments and tax authorities, as well as for merchants who previously had to remit VAT to multiple countries.
Reduce VAT fraud.
It is estimated that VAT fraud cost EU countries €160 billion in 2017. VAT fraud can be as simple as non-EU businesses finding loopholes to avoid paying VAT, or as complex as complex VAT fraud rings run by professional thieves.
Make Business Fairer for Eu Merchants
In addition to VAT fraud, it is also more difficult for EU businesses to keep pace with non-EU businesses. This is especially the case for smaller projects where non-EU businesses avoid collecting and paying VAT, whereas EU businesses never had the option to avoid VAT.
Big changes are coming – keep your jaw down
For many small business drop CNB Directory shippers, the new EU VAT changes for 2021 mean you will have to change some (or many) elements of the way you do business.
Whether it’s raising prices to account for VAT, opting out of selling certain products to the EU, or some other change, you’ll need to plan accordingly.
