The taxable amount is the amount in respect of a taxable transaction on which VAT is chargeable (usually, the price of the goods or services).
In the simplest situation, if A sells goods over the counter to B for EUR 50, then the taxable amount is EUR 50, on which A must charge B VAT at the appropriate rate, and B pays A EUR 50 plus the VAT.
In order to cover more complicated transactions and circumstances, the VAT Directive contains a set of provisions defining and clarifying what constitutes the taxable amount. It distinguishes between three different kinds of transaction:
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Supply of goods or services
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Importation of goods
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Intra-EU acquisition of goods
Supply of goods or services
The basic rule
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The taxable amount in case of supply of goods and services shall include
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(Article 73 of VAT Directive)
Thus, if a plumber charges a customer a fee for servicing a washing machine plus the cost of travel to the customer’s premises, the taxable amount includes, along with the fee for the service, the recharge of travel costs.
What must be included and what not included in the taxable amount?
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Included in the taxable amount |
Not included in the taxable amount |
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(Article 73, 78, 79 VAT Directive)
Currency considerations
If a foreign currency is used in the documents required for calculation of the taxable amount, the exchange rate will be the latest recorded selling rate at the time the VAT becomes due on that EU country’s most representative exchange market(s). EU countries may also use a rate determined by reference to that market (s).
Businesses may use instead the European Central Bank’s latest published exchange rate (using euro exchange rate for conversion between currencies other than euro). EU countries may require notifying them about using this option.
For certain categories of transactions or certain categories of taxable persons EU countries may decide to use the exchange rate based on EU customs rules for calculation of the customs value.
(Article 91 VAT Directive)