EU VAT Reforms Mean US Multinationals Should Finetune Compliance

Value-added tax can significantly affect US companies operating internationally. Businesses collect VAT on behalf of in-country tax authorities, and countries collecting generally pay it back. But many US businesses may be overpaying—22% of all purchases on average in the European Union—potentially reclaimable as VAT refunds. At those hefty rates, it’s easy to see why mismanaging VAT can lead to financial losses.

Sweeping changes are coming. Over the next five to seven years, efforts to combat VAT fraud will intensify, particularly with the EU’s move toward mandatory e-invoicing by July 2030. US companies operating internationally should prepare now to safeguard against these changes, which will affect VAT administration.

Where VAT Applies

When set up correctly, VAT is a financial burden for only the end customer—it isn’t a cost factor for businesses. It is collected on an accrual basis at each stage of the supply chain on both goods and services. Businesses pay what they owe, even if they haven’t received payment yet, and reclaim VAT paid.

Most countries, including all EU jurisdictions, have implemented VAT and benefit from a steady revenue stream. In Europe, the standard VAT rate ranges from 17% to 27%. When mismanaged in the EU, up to 27% of what a company has paid in VAT potentially ends up a sunk cost with no opportunity for a refund.

VAT Developments

Reforms are ongoing to reduce VAT fraud, which occurs when the tax is charged by someone who isn’t VAT-registered. VAT fraud resulted in 61 billion euros ($70 billion) in losses in 2021, according to a European Commission report.

The EU is moving toward mandatory e-invoicing to reduce fraud and improve compliance. E-invoicing is already happening in several EU countries, including Greece since March 2025, Italy since 2024, Portugal since 2024, and Spain since 2017. Belgium and Croatia will adopt invoicing in January 2026, France will adopt it that September, and Hungary will adopt it in 2028.

E-invoicing remits taxes on the same day as the transaction. For businesses, adopting e-invoicing systems can be expensive and time-consuming. The enhanced transparency and compliance of this real-time system likely will lead to increased audits and stricter enforcement.

Place-of-Supply Rules

The place of supply and the nature of the goods or services sold determine the VAT rate charged. For transactions within a single country, the place of supply is that country.

In cross-border transactions, each involved country may claim the place of supply to receive the VAT revenue. For goods, the place of supply generally is where the transportation begins. If there is no transportation, it is where goods are physically possessed.

Nuances apply, particularly with online platforms, for which the place of supply is where the customer is located. This distinction helps determine whether the transaction involves goods or services.

Marketplaces such as Amazon can be tricky because they connect potential clients with suppliers. Although Amazon.com Inc. might not be directly involved in the contractual engagement or supply, it is considered a “deemed supplier” from a VAT perspective. This creates two supplies: one from the supplier to the platform, which is VAT-exempt; and another from the platform to the customer, with the place of supply being where the customer is located.

VAT Compliance

VAT is calculated on the net value of goods and services. If charged incorrectly, tax authorities can audit and impose VAT on net sales. To reclaim VAT, businesses need proof such as invoices or import documents.

The EU’s introduction of the One-Stop Shop several years ago was a major development. Businesses can register for VAT in a single EU country and report VAT on sales throughout the EU via a single OSS VAT return. Although sellers must charge VAT at each country’s rates, OSS eliminates the need for separate VAT registrations and returns in multiple EU countries.

For US companies selling goods to private individuals via e-commerce, OSS simplifies the process. If a US company has a warehouse in Germany, it can register there and manage all VAT declarations with the German tax authority. This is convenient for shipping across Europe, as the company can collect sales data in their enterprise resource planning system, generate a list, and submit it to the tax authority, declaring sales to different countries with the applicable VAT rates.

VAT impacts nearly every aspect of a business, making proactive management key. When considering new accounting and billing systems, design and implement those systems to meet VAT requirements. Businesses may need to invest in digital tools to comply with real-time reporting and e-invoicing requirements.

Cross-border businesses selling into the EU especially may face challenges navigating multiple national implementations of the EU standard. These businesses may need to upgrade accounting systems to be compatible with the new standards.

Keeping up with legislative updates and ensuring compliance can help businesses stay aligned with the evolving VAT landscape. Regularly training individuals responsible for VAT qualifications can help familiarize those individuals with new requirements and capture changes that require immediate implementation.

Work with your tax adviser to stay informed about these changes and identify global VAT software that can help automate compliance tasks and refunds, neutralizing VAT’s impact on financial health.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Florian Hanslik is founding partner of terraVAT, an international supply chain management company based in Zurich focusing on VAT and customs.

Stacey Roberts is a CPA, industry educator, and state and local tax partner at TaxOps, a tax specialty and advisory firm based in Denver.

Write for Us: Author Guidelines