In the European Union, as you already know, goods and services must include VAT when transacted. There are 2 cases when registering a VAT number in another country is mandatory:
- if you exceed the distance sale threshold limits
- if you store goods in that country.
Whichever happens first, triggers the obligation to get VAT registered in that country. Exceeding the distance sale threshold limit, mandate you to pay and apply the VAT rate from the specific country.
In the European Union VAT is can be applied based on 2 principles. The origin principle and destination principle. The present EU legislation on VAT was crafted with the aim of arriving at a definitive VAT system based on the origin principle. According to the origin principle, applicable VAT rate is determined by the country where the seller is located. Council Directive 2006/112/EC sets the rules applicable to the VAT system and a framework for VAT rates, The present VAT system is based on the origin principle.
This doesn't mean that the destination principle can not be applied. Although the current EU VAT legislation is based on origin principle, it still allows Member States to choose how they transpose this into their own national legislation. In other words: you can always decide where to pay VAT. Keep in mind our software is built on the origin principle, so it will apply the VAT rate from the departure country unless you exceeded the threshold limit for distance sales in the destination country.
If you did not exceed the threshold limit yet, you can opt-out from the origin country and opt to pay VAT in the destination country. This means you will apply the destination country's VAT rate. This makes sense in cases where the VAT rate is smaller than in the origin country. Keep in mind "opt-out" is not an official term. We are using the term "opt-out" in our articles to describe the procedure to switch from paying VAT in the departure country to paying VAT in the destination country.
You will be able to opt-out after registration, read more about how and why here.