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How does tax representation work?

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Whether a legal obligation or a cost-effective option, a tax representative is an essential tool for businesses liable for VAT in the EU.

Businesses established outside the European Union must apply for an individual VAT identification number and file periodic VAT returns in the EU countries where they are liable for value-added tax (VAT).

This is why, in several Member States, tax representation is a legal obligation imposed on all businesses established outside the EU which carry out taxable transactions in their territory.

Please note that the information provided below is of a general nature only. For Member State-specific information, please contact us.

What is tax representation?

Tax representation is a legal obligation imposed by the tax authorities of certain European countries on foreign businesses residing outside the European Union, in a country that has not concluded a mutual assistance clause for the recovery of tax claims, and which carry out transactions in that EU territory for which they are liable for VAT.

There are many advantages to using tax representation. As explained, in some Member States this is an obligation, but it is also a simple and cost-effective alternative for expanding into new markets in the European Union.

By using tax representation, businesses established outside the EU that move goods in European markets will be able to do so without creating a subsidiary or an entity established on European territory. This means that there is no need for physical premises and/or employees on site, thus avoiding the costs and constraints of setting up a business.

In addition, businesses using a tax representative who is not considered to be established in Europe will not be subject to tax on profits in the Member State where the transactions take place. 

When to appoint a tax representative?

In which cases should a tax representative be appointed?

A tax representative must be appointed if a business established outside the European Union plans to carry out transactions for which it is liable for VAT in one of the European Union Member States.

Below is a non-exhaustive list of transactions which make a business liable for VAT and which require registration in the Member State where the transaction takes place:

  • Imports into an EU Member State of goods from a country outside the EU for which VAT is compulsorily and automatically reverse charged in the VAT return (e.g. France since 1 January 2022);
  • Les exportations au départ d’un État membre de l’UE vers un pays situé en dehors de l’UE ;
  • Les acquisitions intracommunautaires de marchandises dans un État membre de l’UE en provenance d’un autre État membre de l’UE ;
  • Les livraisons intracommunautaires de marchandises depuis un État membre de l’UE à destination d’un assujetti établi et identifié à la TVA dans un autre État membre de l’UE ;
  • Les ventes locales de marchandises pour lesquelles le fournisseur est redevable de la TVA.

Furthermore, failure to appoint a tax representative, when this is an obligation imposed by the Member State, is sanctioned by the European tax authorities by means of penalties and interest for late payment and may lead to constraints in terms of the recovery of deductible VAT.

As a reminder: companies established outside the EU are exempted from appointing a tax representative if the country of establishment of the company is one of the countries with which the European Union has concluded a mutual assistance clause for the recovery of tax claims with the EU. However, the non-resident taxable person will have to register in order to obtain a VAT number and to fulfil his tax obligations.

Who can be a VAT representative?

In order to be a VAT representative, it is necessary to meet various conditions set by the Member State:

  • Le représentant fiscal doit être une entreprise assujettie à la TVA. Ainsi, cette dernière doit être recensée comme redevable de la TVA auprès des services de l’administration fiscale du pays ;
  • Disposer d’une organisation administrative et de moyens humains et matériels lui permettant d’assurer sa mission de représentation ;
  • Disposer d’une solvabilité financière en relation avec ses obligations de représentant ;
  • Le représentant fiscal doit disposer d’une bonne moralité fiscale. C’est pourquoi des contrôles réguliers sont auprès de ce dernier afin de s’assurer de leur moralité indiscutable ;
  • Le représentant fiscal doit disposer du siège social de son activité ou d’un établissement stable sur le territoire.

Who can be an accredited tax representative?

In order to become a tax representative, it is necessary to apply for accreditation with the relevant supervisory authorities. This requires a written application.

In addition, in order to be appointed as a tax representative, it is necessary to comply with the conditions set out above.

Furthermore, only the following businesses or organisations are eligible to become accredited tax representatives:

  • Une filiale de l’entreprise établie hors de l’Union européenne ;
  • Un client ou un fournisseur ;
  • Un commissionnaire en douane agréé ;
  • Un commerçant ;
  • Un industriel ;
  • Un établissement bancaire ou de crédit réalisant des opérations imposables ;
  • Une entreprise spécialisée dans la représentation fiscale.

What documents must be provided? 

In order to appoint a tax representative, the business established outside the European Union will have to establish a mandate before any reimbursement claims are filed.

The power of attorney must be a written request signed by the legal representative of the business and sent to the business’s tax office. It should contain the following information:

  • Le nom et l’adresse de l’entreprise ;
  • Le nom et l’adresse du représentant fiscal ;
  • La désignation par l’entreprise non-résidente de l’UE du représentant ;
  • L’acceptation par le représentant de sa désignation ;
  • L’engagement du représentant d’accomplir ses obligations ;
  • La date de prise d’effet du mandat.  

Please note that it is only possible to appoint one representative for all the operations carried out.

Once the mandate has been sent to the corporate tax office, a written notification will be sent to the business to inform it of the decision made by the administration.

Please note: unless it is established for a specific period of time, the power of attorney is established for an indefinite period. It is therefore valid until the contract is terminated.

Why use the services of ASD Group?

Specialised in intra-EU VAT exchanges, we put our experience at your service to assist you in your day-to-day operations and safeguard your transactions. Benefit from a number of advantages:

  • Un accompagnement optimal. En tant que représentant fiscal, nous prenons en charge l’ensemble de vos formalités en matière de TVA et de taxes parafiscales.
  • A team of specialists at your service. With our network of 27 offices worldwide, you can benefit from a team of tax specialists specialised in intra-Community VAT who will support you through all your procedures.
  • Une veille réglementaire et une compliance. Nous sécurisons vos formalités en identifiant les évolutions réglementaires applicables en matière de TVA dans vos pays cibles, pour vous informer de tout changement en matière de fiscalité.
  • Un contrôle et une sécurité. Nos outils spécifiques assurent un contrôle des flux et des seuils pour sécuriser vos opérations.

For more information on which EU countries require an accredited representative for taxable services performed on their territory, contact our experts. You can always call on ASD Group to obtain your VAT number and file your returns.

ASD Group, your preferred expert contact in international development, VAT and international taxes, customs operations, social regulations and business strategy.

ASD Group works for you using the latest software technologies available and the advanced skills of our teams. Contact us for more information!

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