Taxation and Customs Union

Special schemes

In certain specific circumstances, EU VAT rules are simplified in some EU countries, to reduce paperwork.

Scheme

In every EU country?

Who or what is covered?

Nature of scheme

Small enterprises

NO

Small businesses

Simplified charging and collection of VAT

Small enterprises

NO

All small businesses with turnover below a set amount

Exemption or graduated relief

Flat-rate farmers

NO

Agricultural, forestry & fisheries businesses

Exemption plus flat-rate fee to offset input VAT

Travel agents

YES

Travel agents & other tour operators

Output VAT on profit margin

Second-hand goods, works of art, etc.

YES

Taxable dealers in these goods

Output VAT on profit margin

Public auctions

NO

Auctioneers

Output VAT on profit margin

Investment gold

YES

Transactions in investment gold

Exemption with option to tax

Telecom, broadcasting and electronic services

YES

Supplies by non-established businesses

One-stop shop for registration and payment of output VAT

Small enterprises

There are actually 3 schemes targeting small enterprises (Articles 281-293 VAT Directive):

Simplified charging & collection of VAT

Who is covered

Optional or obligatory

How does it work

Small businesses as defined by EU country.

Optional for EU countries.

Optional or obligatory for business (as defined by EU country).

VAT obligations for small businesses are simplified.

The scope of simplification is defined by each EU country and could for example include flat rate.

This scheme is not meant to reduce the tax burden.

(Article 281 VAT Directive)

Exemption

Who is covered

Optional or obligatory

How does it work

Small businesses whose yearly turnover is below a national threshold.

The scheme does not apply for:

  • sales by businesses based in other EU countries,
  • occasional economic activity
  • exempt sales of new means of transport to customers in another EU country;
  • any other transactions as defined by EU country.

Optional for EU countries.

Optional for business (business may opt for simplified scheme or graduated tax relief if allowed in that EU country).

Small business does not register nor charge VAT (it also does not have a right to deduct it).

(Articles 283-287 VAT Directive).

Graduated relief

Who is covered

Optional or obligatory

How does it work

Small businesses whose yearly turnover is below a national graduated relief threshold.

The scheme does not apply for:

  • sales by businesses based in other EU countries,
  • occasional economic activity
  • exempt sales of new means of transport to customers in another EU country;
  • any other transactions as defined by EU country.

Optional for EU countries.

Obligatory for business.

The rules are set by an EU country.
In general, small businesses eligible for the scheme (which may be for example those above the threshold applied for exemption scheme) have to register for VAT.

They receive a relief on part of their turnover which gradually decreases with the increase of the turnover (until the threshold set by that EU country is reached).

Thus, the tax burden for business is partly reduced.

(Article 282- 292 VAT Directive).

 

Flat-rate scheme for farmers

Who is covered

Optional or obligatory

How does it work

Farmers engaged in in agricultural, foresty or fishing activities set in Annex VII VAT Directive and further defined by an EU country

Optional for EU countries.
Optional for business.

Farmers covered by the scheme do not charge VAT and cannot recover input VAT.

Instead, they charge their customers a standard amount, known as ‘flat-rate compensation’, on their agricultural products and services.

It only applies for these customers: business in the same EU country or non-taxable legal entities in other EU countries but not for other flat-rate farmers or private customers.

This flat-rate fee must be shown on a flat-rate invoice, but it is not VAT and does not have to be handed over to the national tax authorities.

Instead, farmers retain it as rough-and-ready compensation for the input VAT they cannot recover. Their business customers, however, can recover these amounts that farmers charge them, normally through their own VAT returns.

The compensation is calculated by applying a flat-rate compensation percentage (set by the government of the EU country concerned) to the value of the farmer’s qualifying products and services.

Articles 295 – 305 VAT Directive.

 

Travel agents

Who is covered

Optional or obligatory

How does it work

Travel agents and other tour operators who deal with customers in their own name but use goods or services supplied by other businesses (taxable persons).

It does not include travel agents acting solely as intermediaries.

The scheme applies only to travel and accommodation in the EU.

Travel agents providing travel packages outside the EU are exempt from VAT on these transactions.

Obligatory for EU countries.

Obligatory for business.

Travel agents are taxed only on the profits (the margin) they make by supplying a travel package.

In return, however, they are not allowed to deduct VAT on goods or services they buy from other businesses.

All the transactions in the package are treated as a single service transaction – taxable in the travel agent's home EU country.

Article 306-310 VAT Directive

 

Margin scheme for second hand goods

Who is covered

Optional or obligatory

How does it work

Businesses (taxable dealers) of the following goods:

  • second-hand goods (excludes precious metals and stones),
  • works of art,
  • collectors’ items,
  • antiques.

Annex IX VAT Directive

Obligatory for EU countries.

Optional for business.

Taxable dealers who choose to use it will pay VAT on their profit margin (difference between buying and selling price). They will not charge or deduct any VAT on transactions covered by this scheme.

If VAT was paid upon purchase or importation of such goods (e.g. if purchased from a creator or from a taxable person not applying this scheme) a dealer can choose not to apply the scheme to a supply of any of these goods.

In this case, the standard VAT arrangements apply, and they can deduct the VAT when VAT on the supply becomes chargeable.

The goods supplied outside the EU are exempt from VAT.

Articles 311-325 and 342-343 VAT Directive.

 

Margin scheme for public auctions

Who is covered

Optional or obligatory

How does it work

'Auctioneers' – organisers of public auctions of second-hand goods, works of art, collectors’ items or antiques, who act under a contract and for a commission, on behalf of certain other people/bodies

Optional for EU countries.

Optional for business.

Goods are considered supplied to the auctioneer when they are sold in the public auction.

The auctioneer issues an invoice to the purchaser an invoice without VAT.

The taxable amount is the purchaser's bill (object sale price + taxes, duties, charges and incidental expenses) minus (a) and (b):

a) what the auctioneer has to pass on to the principal (which is the sale price minus the auctioneer's commission)

b) the VAT payable by the auctioneer on the sale.
Auctioneers must keep accounts setting out transactions that cannot yet be assigned to a specific account (suspense accounts) in which they show the amounts payable by the purchaser and the amounts payable to the seller, and substantiate both.

Finally, they must also give the seller a statement setting out the auction price of the goods minus the commission they must pay. If the seller is a business (taxable person), this statement is the VAT invoice they must give to the auctioneer.

Articles 333-341 VAT Directive

 

Margin scheme for investment gold

What is investment gold?
For EU VAT purposes, there are 2 broad types:
Bars or wafers

  • weighing amounts accepted by the bullion markets
  • purity at least 99.5%
  • may or may not be represented by securities

Small bars or wafers (1 g or less) may not be included in this scheme in some EU countries.
Coins

  • purity at least 90%
  • minted after 1800
  • which are or have been legal tender in their country of origin
  • normally sold at a price not more than 80% above the open market value of the gold in the coins
  • not regarded as being sold for numismatic interest (coin collectors).
  • In December every year, the EU Commission publishes a list of all coins in the EU that are eligible for this scheme in the following year.
  • Search here for the eligible coins for the year of your interest (the title of the document: List of gold coins meeting the criteria established in Article 344(1), point (2) of Council Directive 2006/112/EC (Special scheme for investment gold)).

(Article 344 VAT Directive)
There are three different types of this scheme explained below.

Type I- exemption

Who is covered

Optional or obligatory

How does it work

Businesses (taxable persons) who produce investment gold or transform gold into investment gold.

Obligatory for EU countries.

Optional for business.

Supply, intra-EU acquisition, importation and futures and forward transactions leading to a transfer of ownership or claims are normally exempt from VAT without the right of deduction, as are the services of any intermediaries involved in the supply.

Businesses can waive this exemption for supplies of investment gold to other businesses (i.e. to choose to have these supplies taxed).

In some EU countries, they may also be able to opt for taxation of gold bars or wafers they supply for industrial purposes (if they take this option, any intermediaries involved must also be allowed to).

Type II- transactions in gold bullion market

Who is covered

Optional or obligatory

How does it work

Businesses (taxable persons) who are members of a regulated gold bullion market.

Optional for EU countries.

Optional for business.

Specific transactions involving investment gold, with customers both within and outside the market are exempt.

In some EU countries, these transactions may be taxed. But any supplies to a customer in another EU country or exports are not subject to VAT.
The businesses covered are entitled to have the tax payable on these transactions suspended and the related accounting requirements waived.

Type III- deduction for traders in investment gold

Who is covered

Optional or obligatory

How does it work

Traders in investment gold and businesses (taxable persons) who produce investment gold or transform gold into investment gold.

Obligatory for EU countries.

Optional for business.

This scheme applies to transactions that remain exempt under the general rule. Where traders sell on exempt investment gold, they must nevertheless be allowed to deduct input VAT due or paid on:

  • investment gold supplied to them by a person/business who has waived their exemption under the Type I scheme or has supplied to them under the Type II scheme
  • the supply to them – or their purchase or import within the EU – of non-investment gold that is subsequently transformed by them or on their behalf into investment gold
  • services supplied to them that change the form, weight or purity of gold, including investment gold.

In addition, businesses that produce investment gold or transform gold into investment gold must be allowed to deduct the VAT due or paid by them for the supply, intra-EU acquisition or import of goods/services linked to that production /transformation, as if the subsequent exempt supply of the gold were in fact taxed.

Articles 344-356 VAT Directive.