Getting VAT Right for a Cross-Border Trading Company

Client profile

Client

Consumer goods trading company with supply chains in the EU and third countries

Countries involved

Latvia, Ireland, the Netherlands, Czech Republic

Annual turnover

Around EUR 2 million

Services

Cross-border VAT advice, accounting

The challenge

The company is registered in Latvia, but its goods never pass through Latvia. They are bought in Ireland, shipped to a logistics warehouse in the Netherlands and sent from there to customers in the Netherlands, the Czech Republic and other countries. Several suppliers and carriers are involved, and one sales invoice does not always match one purchase invoice.

In a model like this, VAT is determined not by where the company is registered but by where the goods are and where they are going. Management wanted to be sure that the transactions were reported correctly in its Latvian VAT returns, that zero-rating its intra-Community supplies was justified, and whether it also needed to register for VAT in other countries.

Our approach

• Traced the supply chain together with the client: where goods are bought, where they are stored, who arranges transport and where they end up.
• Determined the place of supply for each leg of the chain, establishing which supply is the intra-Community supply and which is a domestic supply in the destination country.
• Obtained a written explanation from the State Revenue Service (VID). It confirms that when goods are shipped from Ireland to the Netherlands, the place of acquisition is the Netherlands and no VAT liability arises in Latvia.
• Set requirements for transport documents: every delivery note must refer to the invoice and show all parties and addresses involved, so an auditor can verify the transaction from the documents alone.
• Prepared a table linking each purchase, delivery and payment, and explained country by country which VAT obligations arise there.
• Advised on VAT registration in the Netherlands, where the warehouse and some of the customers are located.

The outcome

• The company has a clear, documented VAT position in every country involved, confirmed by the VID explanation.
• Following our advice, the company is registering for VAT in the Netherlands, removing the VAT risk from the outset.
• Clear requirements for transaction and transport documents are in place, so future reviews and audits will be simpler.
• The company can expand its sales across the EU knowing where and how its transactions are taxed.

Services used

• Cross-Border VAT
• Accounting Services