Only local companies with a fixed or permanent establishment in the respective EU countries can use the VAT deferment system. In order to enable foreign companies to make use of this beneficial feature the foreign company needs to appoint a fiscal representative.
The benefits of fiscal representation are:
- Delayed VAT payments: no negative impact on your cash flow due to VAT deferral
- Easier trading in the European Union: no need to have a company in Europe as the VAT number of a 3rd party can be used
- Easier administration: the fiscal representative will check the VAT numbers of the customers and will file the VAT returns and EU sales listings.
In some EU countries there are 2 kinds of fiscal representation:
- Limited fiscal representation
- General fiscal representation
Ad 1 Limited fiscal representation
A foreign company can appoint a limited fiscal representative (logistics service provider, consultant, customs broker) that will take care of all VAT formalities connected to importing and distributing goods into the European Union. In practice the VAT sub number of the limited fiscal representative is used for the VAT deferment. This way the foreign company does not have to register for VAT purposes in the local EU country. Multiple foreign companies can be handled under this limited fiscal representative number.
Ad 2 General fiscal representative
If a foreign company in acquiring goods from one or more of the EU member states or if this company conducts long-distance sales to parties in the EU a general fiscal representative needs to be appointed. A logistics service provider, customs broker of consultant can act as general fiscal representative. In contrast to limited fiscal representation the foreign company needs to be registered as company in the EU to make use of general fiscal representation.
In the case of general fiscal representation the foreign company is issued a unique VAT number, due to this it is only possible to appoint one general fiscal representative in the respective EU member state.
For both types of fiscal representation the foreign company needs to place a deposit with the Dutch tax authorities. The height of the deposit is related to the average VAT amount to be paid during a particular period (month/quarter)