Maco Customs Service: brokerage, software & consultancy

How does the EU VAT system work?

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Destination principle

The EU VAT system is based on the destination principle, which means that the VAT should ultimately be paid to the government of the country in which the consumer who buys the goods lives. So if company A in the Netherlands sells something to company B in Germany, the VAT should be transferred from the Netherlands to Germany. To realize this, the transaction between the Netherlands and Germany is exempt from VAT. Similarly, when a German company buys goods in another member state, the VAT is payable in Germany.

Please watch this video that explains how the European VAT system works. It demonstrates the rather complex way in which tax authorities keep track of the thousands of transactions that take place each day between companies in different member states of the EU. The system is necessary to implement the destination principle.


The video above shows how companies have to apply VAT. Citizens cannot be obliged to apply this system, since they are not entrepreneurs. However, they can buy goods in another member state. This can be interesting if member states apply different VAT tariffs. It can be extra tempting to buy in another EU country when differences in excise duties exist as well. The EU has therefore formulated maxima for excise goods that citizens can legally buy in another member state without tax interference. Of course, these rules are difficult for tax authorities to control, since internal border controls in the EU no longer exist. These exemptions apply only when citizens transport the excise goods themselves. If the goods are brought to them by the selling company from another member state, the regulation concerning distance selling applies. Nowadays, this has taken the form of e-commerce.

History and future

Maco Customs Service was established in 1953.

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Videos on customs

Maco has developed videos to explain three aspects of customs.

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