EU VAT rules remove VAT burden from late payments
Tax by definition
Tax by Alan Cleaver



While non-paying customers will continue to be a headache for firms of all sizes in 2013, one extra annoyance has been removed for small companies, thanks to new EU VAT rules introduced for the new year.

 Under the old system, VAT was payable on invoices issued, at the time they were issued – meaning companies faced paying VAT on funds they had not yet received.

 Where the customer then went on to non-pay for an extended period, this had significant potential knock-on effects for the supplier’s cashflow.

 Now, however, the regime is changing, so that companies operating in EU member states, and whose turnover is less than €2 million (£1.6 million), will be able to declare and pay VAT on received payments, rather than on issued invoices.

 Commissioner for taxation, customs, anti-fraud and audit Algirdas Semeta says: “These new VAT rules reflect what businesses inEuropeneed today: simpler procedures, reduced costs, and support in applying solutions that best meet their needs.”

The change is good news for small firms; however, big companies will not benefit if their turnover is above the specified threshold.

 As such, companies of all sizes will need to continue to pursue non-paying clients throughout 2013, if their cashflow is to be kept healthy for the duration of the new year.


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