European VAT system for US-based businesses

In our new episode Jonathan Matthews (VAT Global, UK) and Alex Bradean (KR Group, Romania) are explaining how the EU VAT rulles apply to your business.
Author:
KR Group

During today’s discussion, we will guide you through the essence of the EU VAT system, focusing on the VAT registration procedures, the appointment of the fiscal representative and the way of charging the local VAT rates correctly to customers.


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Outline:

2:49 - When does VAT registration become mandatory in Europe for US companies?

3.52 - When could B2B transactions be exempted from the obligation of VAT registration?

5.43 - When, in which circumstances, might American companies use the VAT number in Europe?

7:36 - Is there anything link single European VAT registration for the American companies?

9:15 - Is the VAT registration needed in advance, before the sale is made and good arrived in Europe?

10:17 - Which institution can grant the VAT number?

10:55 - On which parameters or the US firm should select the country of the VAT registration?

11:43 - How long does it take to get a VAT number?

13:53 - What documents would American company need to submit in VAT registration process?

15:09 - Who is the fiscal representative? Is mandatory to appoint fiscal representative?

18:07 - How to avoid common VAT registration mistakes?

20:36 - Is opening a bank account locally needed when registering for VAT in Europe?

22:12 - Is Import One Stop Shop a mechanism available for the US companies?

24:10 - Is VAT OSS registration more complicated than standard VAT registration?

24:54 - What are three main challanges for US companies in Europe?

26:23 - Would US companies be verified before the VAT registration (in terms of UBO or KYC procedures)?

27:50 - How does voluntary VAT registration look like?

30:26 - Bussiness cases: companies seling software (1), companies organising conferences (2)

34:35 - When VAT can be reclaim?


Kacper Kosowicz Hello, everyone, and welcome to our show. In this episode, we are going to raise basic questions regarding the European VAT system from the perspective of the US based business. As an American company, you can either supply goods to the EU or expand your operations by rendering the services like digital ones to EU customers, and then the VAT obligations might arise for your business. Costs of being not compliant are just not translating to possible fines and interest, but first and foremost, can result in losing the business partners and eventually the market in Europe. During today's discussion, we will guide you through the essence of the European VAT system, focusing on VAT registration procedures, the appointment of the fiscal representative, and the way of charting the local VAT rates correctly to the customers. When do the EU VAT rules actually apply to your business? Let's find out. I'm pleased to have today with me, Alex Bradean from KR Group and Jonathan Matthews from VAT Global. Hello, gentlemen.

Alex Bradean Hello.

Jonathan Matthews Hi, Kacper. Hi, Alex.

KK I'm Kacper Kosowicz and I'm going to be your host for today. Alex, Jonathan, for the benefit of our listeners, could you both give us a little introduction of your background, please?

JM My name is Jonathan Matthews. I work at VAT global. We assist companies with the management of their foreign VAT. From a global perspective, we provide services to clients, from e-commerce clients to digital service clients, to enterprise clients. I specifically work in the business development space. I manage our e-commerce sales function and have been working quite closely with Kacper. My background is a variety of sales operations and I studied economics at university. So just really an extension of the debt and customs in the VAT space.

KK Thank you, Jonathan. Alex?

AB I'm the country manager of KR Group in Romania. I have been working in accounting and tax compliance for more than 15 years. During this time I was handling and overseeing customers from many countries and industries. And starting with 2016, I'm director for KR Group in Romania. Currently we are handling a portfolio of more than 100 customers, out of which at least 90% are international companies from US, from the EU, from China, from everywhere, basically.

KK Thank you, Alex. Thank you Jonathan. This is a massive topic, the VAT registration in the European Union. You both know that very well. And sometimes this topic can put the kids to bed if we read something about VAT to our kids, but hopefully we are not doing this. So based on your practice, what are the most common cases when VAT registration becomes mandatory for US firms in the European Union?

JM I think it's always important as a seller to identify what it is you're providing or what service you're providing. That very much then allows you to get to the root of whether you need to to be VAT registered quite quickly. So, if you're a seller selling anything online and that can be delivered from the US or housed in the EU, you're most likely looking at needing that registration of the VAT. For when you start selling in Europe, there are little nuances where you don't need it, but that's really the general rule. If you're selling some type of digital service, again you're also looking at VAT registrations fairly early on in your sales cycle in the EU. And then then if you're selling business to business, this is where the potential exists for you to not have to do VAT register. Again, there's nuances in each of those three verticals. But as a general rule, that's not a bad place to start.

KK So why it would not be applicable for B2B transactions?

JM This is caveated with that. It really is only a requirement, or there are certain countries where a concept called the extended or domestic reverse charge applies. And really what it means is that when you make a B2B sale, or certain activities B2B, you actually are not allowed to VAT register. So it's really only in those examples, and that only applies when selling B2B. So you would have to look at the country where you're owning or moving stock through, and then you would need to identify if you can VAT register. If you can, then you will be required to. But if you can't, then you really are in this grouping. There is just no scenario with B2C where this exists, and I think that is something to just identify.

AB Yeah. I was gonna mention the fact that based on my practical experience until at least until now, the most common case that triggers the register as a non-resident VAT payer is when a US company, for example, is exceeding the sales threshold for distance sales in a particular EU country. But another common case that triggers the VAT registration in Romania, particularly, is when the US entity is importing goods in Romania and they sell them locally, or when they are already registered in another country. But they are moving goods from a warehouse located in another new country, to a warehouse located in Romania.

KK Okay, so keep that as simple as possible. I'm the American company. Then I can wonder when I would use the VAT number for, in what circumstances, when I would need to have this VAT? So far we mentioned the cases, but it's still, I believe, unclear when it would occur for someone to use VAT number. Can you bring some examples?

AB Once they are registered for VAT for example, in Romania, for all the VAT transactions that they are having, they will need to use the Romanian VAT number. So, for the import into Romania, for all sales performed to the Romanian customers.

JM Yeah, I was going to say a similar example would be you wouldn't be able to, call it get your goods into the EU, if you don't have your VAT number because you're paying import VAT. Now, you can actually get them in, but you need your VAT number and an import license, and then the subsequent sale, you need to charge VAT. So really, in order to unlock selling in Europe, you need your VAT number. On top of that, many of the platforms in the EU now won't actually allow you to start selling unless you load that VAT number in the required jurisdiction. So...

KK Platforms, you mean marketplaces, Jonathan?

JM Marketplaces, so on Amazon and eBay, Shopify is not a platform or a marketplace. So there are little nuances again, but in many ways, you really just need a VAT number to initiate trades to be able to clear your goods, to charge the correct VAT rates. Tax office is going to want that VAT. So if you're not charging it, you're actually going to lose whatever margin you've got in order to pay back that VAT. So it's quite complicated now to actually clear without that number.

KK But I can also assume that that might be anything like the pan-European VAT registration. So I'm registering in Netherlands because this is the country of the arrival of my goods, and then I'd like to register, or I need to be registered and move my goods from the Netherlands to Romania to Hungary to, I don't know, France or whatever. And would that be something like one set of rules behind the registration, or one panregional, pan-European VAT registration.

JM Historically speaking, and even currently speaking, the VAT rules in Europe are fairly standardized, but it's very rare, although moving forward in July, there is a simplification. It's historically quite rare to have one VAT number to service multiple jurisdictions. So, each jurisdiction where you own goods, and/or have made sales, you would have most likely needed to register and then account for VAT in each of those countries. The simplification that's come in has somewhat changed that, what hasn't changed is that where you, as a seller, own goods in a foreign country for resale. So like you mentioned, the Pan European program, which for US sellers also very common entry point into Europe, is to replicate what they've done on Amazon in the US, and then kind of try and repeat in Europe. In each country where you own goods, and this is a logistics method of Amazon, which they really do better than anyone else, they move your goods to seven different EU countries to fulfill under the prime banner. And in each of those jurisdictions where you own stock, you are required to register for VAT. And part of the reason is to account for the movement of stock between these jurisdictions, so that the correct VAT and applicable reporting can be done from that stock.

KK Let's say that's $10. So I'm importing these goods to the Netherlands before I dispatch that to other countries. Should I be bothered by the registration in advance before my goods arrive in the Netherlands, or after the sales is made?

JM So, in an ideal world you want to do it before. It is quite difficult to plan things to happen perfectly at the same time. So in many ways you would want to have your registration before. Just to kind of add to that, the rule goes back to where you own stock. You need to have that number. So even though the Netherlands is your entry point into Europe and may not be an Amazon fulfillment center, it becomes an I own goods in Netherlands and therefore need the registration. Again, from a compliance perspective, you do want to have a VAT number before you move goods through the Netherlands to stop any potential delays at customs and import VAT that may not be claimable. It can become quite a complex solution to fix when trading or clearing non compliancy.

KK So Alex, who issues a VAT number? If in an ideal world, you'd like to have that in advance, you need to know who to address your case to right? So, who is that body, governmental body that would give you the VAT number?

AB That would be the local tax office from each city, from each country. So for example, in Romania for non-residents, local authority that is issuing the VAT code is the General District of Tax office from Bucharest, and the VAT number is issued through the fiscal representative that is filing the registration on behalf of the client of the US entity in this case.

KK But can you pick, like select whatever country you like in Europe to be registered for VAT? On which parameters the US based company can select the country of the VAT registration?

AB The US company should register in most common cases in the country where it will have the bigger activity, or let's say the logistics is easier to handle. But they should not forget that even one transaction performed in a certain country, depending on the nature, might trigger the need to register in that specific country. So they need to be aware to continuously need to assess their activity from a VAT point of view.

KK Ok, and Jonathan, from your perspective, you said about ideal world, an ideal world means that you don't need to wait for your VAT registration. So you get that via, I don't know, some kind of digital platform. It doesn't work like that in most of the Central and Eastern Europe countries. How long does it take to get the VAT number? For an American company, I would add, for an American company.

JM That is the type of question similar to how long is a piece of string. And there's two factors to consider when dealing with how long that number takes. There is the collection of the VAT pack which should not be included in the length of that number. Then there is the concept of pending at the tax office. That is how long it really takes to get a VAT number. It can vary from four weeks to three-four months at the moment. It really depends on the country, the demand. It's a tough question to answer, but you're looking at around eight weeks, I would say eight weeks on average, you can get a VAT number in most of the EU countries.

KK Alex, how does that look from the Romanian perspective?

AB Pretty much the same as the rest of Europe. For example, in Romania, the minimum time frame for the tax office to issue the VAT code after the fiscal representative file for registration is still 20 working days. But you need to take into consideration that there is a number of days to prepare the documents for the US entity to sign and send them to Romania, to translate them because our tax office doesn't accept any document in a foreign language other than Romanian language. So to sum it up, in practice, I think we've never made it to register a non-resident for VAT purposes in less than 6 weeks.

KK Yes, but there are countries where the English in the European Union, maybe it's not official, but the documents would be accepted also in English.

AB Exactly, one of them is Hungary, as far as I know.

KK So, that somehow corresponds with my question about the set of rules, whether it's unified or not.

AB It's rather not. Let's say that the documents needed for registration are quite standardized in all European countries, but the format of the registration and the documents that are received by the tax office, this depends on country by country.

KK Okay, so let's look with more detail into the VAT registration procedure. What documents would an American company need to submit in VAT registration process in Romania, for instance?

AB There is a standard set of documentation compiled of an application that needs to be prepared by the fiscal representative and signed by the client. There will be also a need for a statement to describe the performed activity in Romania, so what this company will be doing with the Romanian VAT code. Also, we will need company documents from US, something like articles of incorporation, articles of Association. If they are registered for sales tax in the US, we will need to receive an authorized copy from that certificate. We will also need the power of attorney to represent them in Romania in front of the tax office, along with the documents that need to be signed by the US entity. Also, the fiscal representative will need to sign some documents, the so called written consent. So the fiscal representative must give to the tax office a document, an official document that states the fact that we, as fiscal representatives, are accepting the mandate to become fiscal reps for our customer.

KK Jonathan, who is a fiscal representative? Because I like our jargon, I like the nomenclature we use, but I believe again, for the benefit of our listeners, we should explain who the fiscal representative is.

JM What a fiscal representative really, at a practical level means is, it requires that an entity established in that country where you're registering for VAT is the one that is appointed to deal with the tax office on your behalf. So, for example, in certain countries where a fiscal representative is required, it needs to be done through a local Italian, or a local Spanish, or a local Romanian accounting firm or tax firm, as opposed to just registering someone because you provide compliance services in a foreign country. And what it does is it gives the tax office a level of assurance that the VAT can be paid, and if not paid, there is a mechanism to reclaim that or get that VAT paid through the local entity. It's quite complex for, complex/impossible for a German tax office to sue an American business. The mechanisms to do that are quite complex. So what a German tax office would do is potentially force a US company to hire a local German accountant who bears this risk of noncompliance, so that if the US entity did not pay their liability the German tax office can go after the German accountant. That's somewhat of the logic behind fiscal rep is to reduce tax office risk in scenarios where they can't mitigate or claim back, or get the VAT that is owed.

KK Alex, you mentioned that there would be a consent needed to be provided, a consent of the fiscal representative to be provided in the process of VAT registration. Does that mean that fiscal representative, or appointing the fiscal representative is mandatory of the US based company wanting to be registered for VAT?

AB Yes, under the Roman legislation, if a non EU company wants to register in Romania for VAT purposes, they must nominate a fiscal representative in Romania. So, as Jonathan said, the company that is establishing in that particular country, in this case in Romania, it's an accounting company or consulting company, and this company must give the consent to be appointed as fiscal rep because once they are becoming the fiscal rep, they will be jointly liable for all VAT responsibilities of this particular US entity in Romania. So, if something goes wrong, like Jonathan said, the Romanian tax office will hunt the Romanian company, not the US entity.

KK Staying in the registration process, I'd like to ask you about the main pitfalls and the mistakes that might be avoided by US firms in the registration process based on your experience. So what are the most common mistakes made in the VAT registration process when it comes to completing the documentation?

JM What we try and do, and I'm not sure how common it is or uncommon, and it's a bit of a difficult question for me to answer, that what we would try and do is assist during the registration process because of how common mistakes are. And it can be tiny, tiny things. It can be signing in black ink as opposed to blue ink. It can be electronically signing something as opposed to a wet ink signature. And it could be putting in a business registration number where your local VAT number should be. So it really is complex, specifically because you're being requested to sign documents in potentially a variety of languages, and the documents are in a variety of languages. And then on top of that, there could be requests to translate documents, and some of the translation would be an apostille, and then on top of an apostille you would need a certified translation versus a non certified translation. And if you were to receive the, call it VAT requirements, over email for multiple countries. It would be very, very confusing to deal with it. So there's a margin of mistakes that are happening through it. Often it isn't something big, but it's a variety of little mistakes because who's really reading the fine print? It's not common. Things are rejected because you signed in a different color, and that would be a tax office would straightout reject that and say, put your name in red pin.

KK Alex, any reasons for declining the VAT registration due to the incomplete documentation, or incorrect one in Romania?

AB There were a lot of rough cases. For example, the documents were not sent APA style as requested, just notarized or just to sign under private signature. And obviously the tax office refused to register that particular company until the file was not completed. So from my experience, the biggest and most common mistake was not paying attention to the requirements sent by the consulting company that registers the US entity in Romania as the VAT payer. By saying that, I mean that they are not paying attention to the needed document in particular, APA style versus notarized, or versus signed under private signature.

KK Speaking about the rules, again, in the registration, would the bank account in the local bank be required in the process of registration?

AB For Romania it's not mandatory to have a bank account open in a local bank. If the US company can pay the VAT from their own bank account in US, or wherever, if it's open for the tax office it's fine.

KK But it has to be paid in the local currency.

AB Yes, all the VAT payments must be paid in RON. So the bank account held by the US entity must be a multi-currency account that allows payments in other currencies in this case, especially in RON, our local currency in Romania.

KK Jonathan, you've been facing a lot of this kind of cases of pan-European registration of the US companies. Is the bank account the topic of these discussions?

JM No, it's not a requirement, as Alex said. There are scenarios where all of a sudden it could become a requirement. So, if ever you are in a refund position in Poland, you would need a bank account to receive the refund. But to register for VAT, generally speaking no, like Alex said, it's paying the tax office in the local currency is actually the question. So if you have a bank solution that can do that, then that's perfect. If you don't have a multi currency account, then you would again need something. If it's at that stage that you're then going to look at either an extended US account, where you can get that currency, or potentially looking at something in Europe, but not required.

KK Can we now focus on the IOSS for instance, so Union One Stop Shop, or Import One Stop Shop in this case. Jonathan, would that be a solution available for the American based companies?

JM Absolutely. And as long as certain requirements are met, then it will be a brilliant solution for not only US sellers, but non EU sellers, or sellers who have stock located outside Europe at the time of sale. So the underlying theory behind the IOSS is to reduce the fraud and the VAT gap. And it really is to basically say, that if you sell low value goods below €150, not on a platform or a marketplace, so your own websites, and the goods are outside of the EU, the US. There is then a simplification which allows you to ship, call it almost like it's DDP, where you're paying the duties, the customs the clearance, and you're able to really shift to EU 27 without worrying about triggering addition VAT obligations. So it really does fit certain sellers who will be able to take huge advantage of it. Not every seller that's into that category, you could be selling on a marketplace goods to the value of €500. You're not going to fit into it, but it is definitely working towards a unified, simplified, single EU registration, or at the very least non marketplace low value goods.

KK Yeah, I think that's the main requirement, right? So only the firms, the companies that are selling the goods of intrinsic value of €150, or below €150 would be eligible to take advantage of IOSS, register in IOSS and then not to pay the import VAT. How do you see, from your perspective, the VAT registration, or IOSS registration? More complicated, less complicated than the standard VAT registration?

JM It's in very early days, so there's definitely going to be a rush of IOSS/OSS registrations occurring across the world and towards the EU. So the period by which it is taking assume will be longest now, as the tax offices refine the process and the demand drives down, you'll hopefully see a speed up. Am I going to commit to whether it's more or less complicated? It's really hard to say at the moment, but my feeling is it's not as complicated. Registering in Europe for VAT seems to always have a complication to it.

KK And when it comes to again, the pitfalls or some kind of problems that US companies can meet in Europe, can you name three main challenges? Not maybe in terms of registration itself, the VAT registration, but in terms of dealing with the VAT in European Union.

JM The first challenge is actually understanding what your obligations are and constantly relooking at those challenges. The second challenge, under the new IOSS, would at the very least be being able to charge destination VAT. And then the third challenge would be, it's quite difficult with the IOSS because it really does simplify a lot of things, but I would say the third challenge would be how to deal with returns because the IOSSS doesn't account for returns, and that could be something to worry about.

AB Yeah, main challenges. I believe that the most important challenge is to identify to register, the need to register as the VAT payer from my previous experience. Other challenges are identifying the right company to represent you fiscally in that particular country or region, and also the time frame needed for registration. As I mentioned, in most cases, the companies are initiating the registration very close to the moment when they want to start a transaction, or even after the first transaction. So it's highly advised to take into consideration a sufficient time frame to register for VAT purposes in the EU.

KK Would companies from United States be verified before the VAT registration? I mean, ultimate beneficial owner procedure, or some sort of KYC procedure in place before they were allowed to become the European marketed sense of having a VAT number? Is that something that they can meet or not?

JM So generally speaking, the documents that are submitted as part of the registration pack would include in a certain level of detail around the activity the company is doing. Have they got a purchase audit for warehouse space, proof of activity, whether it be historically or in the future? The tax office is already requesting enough documentation to be able to then do their own KYC of the director's passport, or the shareholders agreement. They will look at any historical tax and obligations that they've had, and then they need to then prove that they're registering because they need it. So the tax office won't just hand out VAT registrations if you request one. You would have to have warehouse space booked out. You would need to have relationships with logistics firms, and they will request those types of documents. So in theory, when they grant you your VAT number, they understand who you are, what you've done, what you plan on doing in the EU.

KK It's, of course, easier when you are falling into, or you're subject to the VAT registration, but sometimes you would like to do the things in advance, as we said a couple of minutes ago. And then there is a possibility of the kind of voluntary VAT registration, right? Before you are meeting the obligation. So it's even harder to pass through that procedure. Any thoughts on this?

JM So two thoughts on that and Alex, if you want to jump in, I apologize just on this train of thought. The voluntary registration is when you are before the need, so you can definitely voluntarily register and I don't think it actually changes the requirements to the tax office. What the tax office is looking for is they're looking for what they call an intent to sell. Now, it can take weeks, months to lock down and negotiate with a freight forwarder and a warehouse company in the Netherlands, for example, or in Romania. And when the tax office is requesting the intent to sell, they're looking at those types of correspondence. So it's not so straightforward in that you have to provide documentation showing that you've taken up warehousing space, but what you are required to do is show that intention to sell, whether that be part of proving your existing website in the US, and then the correspondence that you've had. And if you're doing this before you've created a taxable activity, or after won't change. The fact is they're still going to request the same documentation for the seller. It makes much more sense to do it before the need has been triggered. Aka a voluntary registration.

AB Exactly. From the Romanian point of view, the registration is mandatory before performing the transaction. In practice is not always possible, for example, but as Jonathan said, it should be a voluntary registration documentation. It's the same as in all other cases, so there is nothing added in particular if a company just comes to the tax office and says, okay, we want to register for VAT purposes in Romania. They will be always asking for the same documents, even if the US entity doesn't have, let's say, contract signed with Romanian warehouse, Romanian logistic company, Romanian customer, or something like this, they need to prove the intent to do business in Romania. Sometimes even an email sent by the potential customer from Romania to the US entity saying, okay, guys, I want to order five pieces of that. It's enough to register that entity as VAT payer in Romania.

KK So far we've been very good centric, like good focus in this discussion. But I know that there are other cases like companies that are selling software, or they are organizing conferences. What could be important for these two groups. And also taking into account B2C and B2B differences, especially for software sellers.

JM For software sellers, I'd say the most important thing to consider is B2C versus B2B. B2B often doesn't trigger VAT obligations, and is actually a fairly easy transaction to account for. The moment you're selling some type of subscription, or digital service to the end user, you've got a whole subset of requirements to register for, and that's on a global level. And Europe actually has a really good simplification called the MOSS, which is the Mini One Stop Shop. Not to be confused with the Import One Stop Shop or just the One Stop Shop. And it actually came first. And what it does is that it allows for an EU wide VAT registration to account for all of your sales from a digital service perspective. Often the threshold is very close to, if not, nill. So the moment you start selling to Europe that type of service, you should already have known you have an obligation. And if not, you should know after this podcast you would have one. The UK doesn't fit into that anymore. And there are global registrations now coming, which is interesting in that goods, Europe is very, very complex. Digital services, it's very, very simplified. Where it gets complex for a digital service is Mexico, Japan, Taiwan, Singapore, Turkey, New Zealand, Australia. And with the advent of digital service, there's no requirement to sell my good to New Zealand. I don't need to put it on a truck or a boat, and it takes months to go there. I just need to market to those customers. So, global compliance becomes a really big question for client selling digital service. I know that went a bit off topic. But it's hand in hand with that.

KK It is important for us. And you know, Mini One Stop Shop, Import One Stop Shop, and your mind can just blow up. Because Mini One Stop Shop is still a full One Stop Shop, but for digital services, and it's a tricky name, I believe. So getting back for the second part of my question. So to the organizers of the conference and trade shows in the EU, would they need to register? Would they need to register for VAT once they'd like to have a conference, organize a conference in the European Union?

JM If you are charging entry to the events, you need to register for VAT. And then when I say charging entry B2C, individuals that are non VAT registered, entities that would attend your event. So, a lot of events would fall into a variety of different categories, tones for one another category for another, depending on what the primary service or event is. But if the event is charging €5 for me as an individual to pay to go see and explore, and do whatever that event is hosting, that is a VAT registration in that country. But if the event is to other businesses, then it's most likely you don't need to be VAT registered. That will lead to a whole set of complicated questions, because you might incur local VAT, which would actually lead you down a root of a reclaim, as opposed to a registration, both ultimately netting out at a very similar amount of money that you would need to spend, because the VAT that you incur can be reclaimed, and if you did need to register, you would pay it over and there would be differences. But both solutions work, and it really depends on what your event is and how you get remunerated at that event.

KK That's excellent that you just mentioned the reclaim, the possible reclaim of VAT, because in Europe we tend to say that the VAT should rather be deemed as no cost for companies. So, when the VAT can be reclaimed on the goods and services, in what situations? You mentioned one. But are there any other possibilities? And why is that important for US companies, might be important for them?

JM So, yes and no. There are other scenarios where you would, so there's two different ways to be refunded by the tax office. One is through a reclaim, which is done through two different mechanisms, an 8th or a 13th directive, whereby you don't need to register, but you still incur VAT. That is done through an 8th/13th directive to reclaim that VAT. The other scenario whereby you end up in, or that a tax office owes you money, instead of a reclaim position, you end up in a refund position. And the difference here is that, let's say, in that example, or in an example whereby you import 1 million worth of euros in a month, euros worth of VAT. So you do a huge import into a country, and in that month you only sell 50 000 or €100 000 worth of goods. You would have paid more than you have collected, and the difference is owed to you. And it's the same, as when you import, and you then collect more than you've imported. The difference is owed. So it's always a differential calculation. And if you're in a negative because you paid more, you would then be refunded it on your VAT return. Or, you would reclaim it, depending on how you had set up. But both, again equal a very similar outcome.

KK So be very cautious when it comes to words and proper wording in this regard. I think we're gonna dig more into details, or go into details in next episode when it comes to refund position and the reclaim position here. But for today, I think we can assume we almost touched all things we wanted. Alex, Jonathan, thank you so much for sharing your knowledge with us. That has been a great pleasure having you here today.

AB Thank you to Kacper for the invitation. It was a pleasure to share my knowledge with you guys.

KK Thank you.

JM Kascper, thanks so much, Alex, that was a lot of fun. I really appreciate it.

KK And in the next episode, we will dive into the monthly VAT obligations and discuss how to create legal invoices compliant with local EU laws. We will also dig even deeper finding a way to cope with various VAT rates. We have still 27 countries in the EU, and a lot of things that are supposed to be taken into consideration when it comes to VAT rate differences. And I can only thank you for joining us for today's episode. Stay tuned. Thank you, Alex. Thank you, Jonathan, for today.

JM Thanks, Kacper. Thanks Alex.

AB Bye bye.

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