EU sales: Increased control of VAT
Companies with B2B sales in the EU must report sales in the VIES database and enter the VAT in Box B. The Tax Agency has increased control after criticism.
Following an extensive investigation, the Danish National Audit Office has issued harsh criticism of the Danish Tax Agency's VAT control of EU transactions. The criticism is based on two points:
1. Businesses' control of their customers in VIES (the pan-European VAT control system)
2. The link between companies' VAT declaration in Box B and reporting to the EU sales list.
Rigsrevisionen believes that insufficient control increases the risk of VAT fraud in Denmark and other EU countries.
The Tax Agency has announced that it will pay extra attention to the difference between "Category B - goods" on the VAT return versus EU sales without VAT and the ongoing checks in VIES.
"Companies that have differences between what they report on their VAT return and what they report to VIES will experience increased and targeted guidance to reduce the differences. The Tax Agency has also allocated more resources to VAT control based on the information in VIES," the Tax Agency writes in a press release.
Check the existence of your EU customers in VIES
To be able to sell to EU customers without VAT, you must be a VAT-registered business in another EU country.
It is also a requirement that you as a Danish company can prove that the buying company actually exists. You can check this in the VIES database. Here you can see if the customer's CVR number and address match. If so, this proves the existence of the customer and you can sell goods without VAT. Remember to save the documentation that you have checked the customer.
The practice is that as a selling company, you should check the information when you enter into a new customer relationship and then once a quarter.
VAT declaration and reporting of EU sales must match
When a company sells goods to companies in other EU countries, it can - if the rules are met - be done with reference to reverse charge, where the buyer and not the seller has to pay the VAT.
These sales of goods must be reported in "Box B - goods" on the VAT return. The sales must also be reported to the EU sales list. The amounts in "Box B - goods" and the EU sales list should match.
Facts: What is VIES?
VIES is a pan-European VAT control system where companies report their EU sales. This is in addition to the information that must be reported on companies' VAT returns. The system was established to strengthen the authorities' control of VAT fraud in EU trade.
Companies with sales to other companies in the EU are required to report their EU sales to VIES. These reports must be consistent with the company's reports of EU sales on the VAT return. VIES is not used to collect VAT, but as one of several tools to check that businesses are paying the VAT they should.
The database includes all EU countries except Germany and Spain. See VIES here.
More information
If you need assistance or advice on EU trade, you are welcome to contact inforevision's tax, VAT and duties department.
