Value Added Tax (also known as VAT) is levied in some countries on the sale/purchase of certain goods and services. It can generally be defined as a consumption tax calculated and collected on the basis of value added. Usually VAT is calculated at the destination, since the application of VAT depends on the jurisdiction of the seller and the buyer. It should be noted that VAT accounts for almost 20% of the total amount of taxes levied worldwide.

Whenever you decide to do business in the EU, you will certainly face the issue of registering a VAT number. VAT issues are complex. However, all EU Member States follow the EU VAT Directive, so each EU country has developed its own legislation regarding VAT claims and reporting.

Once a company is registered for a VAT number, it must regularly submit a VAT report that will contain information on incoming and outgoing invoices, regardless of whether they were issued/received by other counterparties from the EU or partners from countries not within the EU or not. Most importantly, all transactions must be reported on the VAT return, including invoices where 0% VAT has been applied.

Mandatory VAT registration for EU companies
There may be several conditions when an EU company must register for VAT and file VAT returns. In most EU jurisdictions, VAT registration is required in the following cases:

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When a company registered in the EU reaches a certain sales turnover, it is obliged to register as a VAT payer. The thresholds for mandatory VAT registration are determined by the VAT Law of each Member State. For example:

€16,000 in Estonia,
€30,000 in Austria,
1,000,000 CZK in the Czech Republic,
etc.