EU VAT compliance step-by-step guide
2nd Step: Accurate VAT calculation
Again there are good and bad news. Bad news is that you cannot sell at your domestic VAT rates anymore, VAT to be paid is according to the destination VAT regulation (you can check the rate here). Which means you have to have a database at hand with all EU VAT rates, including the reduced and the senseless. The good news is that you will be able to compete efficiently, this removes the unfair tax advantages. Another good news is that there are tools to handle the calculation and they have a name: Full Landed Cost Calculators (FLCC).
As is usual with the solutions, there are the good, the bad and the expensive. High cost is by no means an indication of superior performance or accuracy, which are both requirements for compliance. For example, some expensive products by well known large actors cut corners and simply apply the highest national VAT rate without any consideration.
Our strong recommendation is to use only calculator which is based on Harmonised System codes, the universal customs codes, HS6. Only HS facilitates the accurate VAT calculation, including the national reduced rates to a degree. In order for such a FLCC to work, you need HS-codes, automated or manually input into your product catalogue. All modern e-commerce platforms would have support for HS code in product catalogue. After the work is done everything including VAT calculation and the infamous Intrastat is automated, accurate and compliant. EAS tools naturally facilitate both manual and automatic handling of the HS codes, we can even check in real-time the accuracy of the code.
EAS solution calculates the VAT and duties automatically based on multiple data and databases, HS code in itself is not yet a complete solution. The accuracy is the basis of the obligatory compliance – which is entirely automated with EAS.
The accurate calculation is essential, don’t cut corners here. Recurring mistakes will result in banning from the official OSS system, a mountain of unnecessary work and basically create potentially terminal risks to your business.
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