VAT (Value Added Tax) is perhaps the most complex tax for beginning entrepreneurs to understand. Many people fear VAT registration, but it can also be a powerful tool for growing your business. In this guide, we'll look at when registration is mandatory and when it's advantageous to do it voluntarily.
The Basic Rule (The €51,130 Threshold)
As of January 1, 2023, the threshold for mandatory VAT registration was raised to €51,130 turnover in the last 12 months. If you reach this turnover, you are obligated to submit a registration application within 7 days.
1Mandatory Registration
Besides the €51,130 threshold, there are other cases where registration becomes mandatory regardless of your turnover:
- Reaching €51,130 turnover
Includes taxable supplies for the last 12 calendar months (not calendar year!).
- Receiving services from abroad (Art. 97a)
If you receive services from companies in the EU or outside (e.g., you pay for Facebook, Google advertising or hosting), you are subject to specific registration.
- Providing services to the EU
If you provide services to clients (businesses) in other EU countries.
2Voluntary Registration: Why Do It?
You can register for VAT at any time, even with €0 turnover. Why would anyone do it voluntarily?
When Is It BENEFICIAL?
- •You work with business clients (B2B): They are also VAT registered, and your tax is not an expense for them (they recover it). You appear as a more serious partner.
- •You have large initial investments: If you buy expensive equipment, vehicles, or goods, you can recover the VAT (20%) from the state.
- •Exporting goods: For exports, the rate is 0%, but you have the right to tax credit for your purchases. Thus, the state effectively gives you money back.
When Is It NOT Beneficial?
- •Clients are individuals: The end customer pays the VAT and cannot recover it. If you register, your goods become 20% more expensive for them (or you lose 20% of your margin).
- •High administrative burden: Accounting services for VAT companies are more expensive (usually double).
3Brief Comparison
| Characteristic | Without VAT Registration | With VAT Registration |
|---|---|---|
| Competitiveness | Better prices for individuals | Preferred partner for businesses |
| Tax Recovery | Not entitled (VAT is an expense) | Recover VAT on purchases |
| Accounting | Cheaper and simpler | More expensive, monthly declarations |
| Invoicing | Simplified invoice | Tax invoice with charged VAT |
Practical Example
Imagine you're an IT specialist (freelancer) and buy a laptop for €1,534 including VAT.
Without registration
You pay €1,534 to the store. This is your final expense.
With registration
You pay €1,534, but the state returns €256 (VAT) to you. The real cost for you is €1,278.
4Registration Procedure
Registration is done at the NRA (National Revenue Agency). It usually takes between 3 and 14 days.
- Application submission: Can be done electronically with an electronic signature (through the NRA portal) or in person.
- NRA verification: Tax authorities may request documents about your activity (contracts, invoices).
- Registration certificate: You receive a VAT registration certificate. From the date of receipt, you must charge VAT on your invoices.
Still Not Sure?
Use our VAT calculator to see how the tax changes the final prices for your customers.
Go to VAT Calculator