Although you do not live in a European Union country, you have probably heard about Value Added Tax, also known as VAT, at least once in your life. It is a general consumption tax that is added to services or goods that are either bought or sold within the EU. The rates differ from one country to another, so for those who want to open a business in Germany for instance, they should start learning more about the Germany VAT thresholds. It is worth mentioning that over the years, numerous myths about this tax have been heard, so here are the most popular ones debunked.
#1 – There is no need to charge VAT if you are selling outside UK
Specialists in this domain agree that there are various nuances in the VAT area that many start-up business owners misunderstand and one very good example is related to those who supply goods to private customers that are not based in the UK for instance. You should know that in such case, distance does apply as an important criterion in charging VAT. The moment you meet the specific distance selling threshold, it is mandatory to register for Value Added Tax in that specific country, be it Germany or any other country.
#2 – It is not necessary to register for VAT in Germany, because they will never find out
This is among the most popular misunderstandings people deal with the moment they decide to start their businesses in Germany. You do need to follow the registration process for Value Added Tax in this country in order to avoid being fined or encountering any issues that may put your business at risk and it may affect its growth.
#3 – If it’s free of charge, it’s also VAT free
Contrary to what many people believe, it is still necessary to pay Value Added Tax even though you offer gifts of goods, be those properties or any other types of goods. This is more common in the case of companies or businesses that offer gifts of properties or various other assets to charities for instance, where it is still necessary for the tax to be paid.
#4 – You do not have to register for VAT if you sell products online
This myth has started to increase its popularity lately, since online shopping has started to be more accessible to numerous people and businesses. It is true that when it comes to European VAT compliances, there are different rules that apply for e-services, but these are still not exempted. Whether it is about e-learning services or downloads for software, music, games, films, sellers should still ensure colleting VAT from their customers in accordance with the Value Added Tax rates for each of the countries their consumers live.
As it can be seen, these are some of the most popular myths related to VAT that business owners should stop believing. It is mandatory to do detailed research regarding this type of tax in order to make sure nothing affects your business.