VAT is not charged on purchases from other EU countries when you supply your VAT Registered Number to the vendor. However, you are required to keep records of these purchases and record Notional VAT as if the goods were purchased domestically. The example below shows the implications of this for your record keeping.
Assume that you have purchased €200 of goods from Spain. Assume also that your domestic VAT rate for these goods would be 21%.
The actual transaction that took place can be summarized as follows:
A. Total amount of purchase: €200.
Total VAT Applicable: 0.
Net Purchases @ 0%: 200.
Net Purchases @ 21%: 0.
However, the record of the transaction you are required to keep is as follows:
B. Total amount of purchase: €200.
Total VAT Applicable: 42.
Net Purchases @ 0%: 0.
Net Purchases @ 21%: 200.
When you select the VAT Type ‘Other EU’ the Total for the Invoice does not include the VAT element. The amount owed to the supplier is unchanged but the amount of Notional VAT is recorded for the VAT Reports and is reported separately in the Purchases Book Vat Analysis reports in the accounting software.
