AvaTax Update provides settings for managing place of supply rules if you make transactions into a European Union (EU) Member State or other VAT countries globally. Select specific countries where you have a permanent establishment and specify whether you are the importer of record for a particular goods transaction so VAT rules are more precisely applied.
If your business has sales that are below the VAT distance sales threshold in a country, make the application of VAT rules even more precise by adjusting your threshold settings.
What is a permanent establishment?
A permanent establishment is a fixed place of business which generally gives rise to VAT liability in a particular jurisdiction. Examples that generally qualify as a permanent establishment include a branch, a factory, warehouse, or a place of management. The activities of a dependent agent may also give rise to a permanent establishment for the principal. Other examples that are generally excluded from the definition of a permanent establishment are:
- ancillary or preparatory activities
- the use of a storage facility solely for delivery of goods to customers
- the maintenance of a stock of goods owned by the enterprise solely for purposes of processing by another enterprise
- purchasing or information gathering activities.
Configure a permanent establishment
Select countries where you have a permanent establishment so the appropriate VAT rules are applied to your transactions. AvaTax Update assumes that permanent establishment is involved in transactions in these countries.
- In AvaTax Update, go to Settings > Manage Where You Collect and Remit Tax.
- See if the countries where you do business and have a permanent establishment have already been added on the Where You Collect Tax page. If not, click Add Region to select and add the countries.
- On the Where You Collect Tax page, click the pencil icon next to a country to configure your place of supply settings. By default, This is a Permanent Establishment is checked. If you don't have a permanent establishment in that country, click the box to uncheck it.
- Click Done with Country.
Who is the importer of record?
The importer of record is responsible for the goods and the customs duties and tax payable upon import. As a result, the importer of record is liable for collecting the Import VAT applicable to the goods at the destination. Importer of Record is supported by Avalara APIs and batch imports but isn't yet available in all connectors.
The supply of goods from one EU Member State to another doesn't require an importer of record because the EU is a single customs union where all goods circulate freely between Member States.
The importer of record defaults by country based on your settings for Where You Collect Tax. Set You are the Importer of Record to True (checked) to calculate and collect taxes in the country.
Change the default importer of record setting
AvaTax Update uses the country importer of record set in Where You Collect Tax, by default. We recommend that you maintain your country importer of record settings in Where You Collect Tax, in most cases.
If your accounting software sends the importer of record information at the transaction level and your invoices have varying importer of record settings, then you may want AvaTax Update to use the importer of record set at the transaction level. Contact Avalara Support to have AvaTax Update use the importer of record set at the transaction level.
Specify the importer of record in Where You Collect Tax
AvaTax Update uses the country importer of record set in Where You Collect Tax, by default. To specify that you're the importer of record for a country:
- Go to Settings > Manage Where You Collect and Remit Tax.
- Next to the country you wish to change, click the pencil icon.
- Check You are the Importer of Record, and then click Done with Country.
Specify the importer of record when adding or editing a transaction
Set the importer of record on a transaction if you had Avalara Support change AvaTax Update to use the importer of record set at the transaction level. Otherwise, the setting from Where You Collect Tax is used and what you enter on the transaction is ignored.
To specify that you're the importer of record on a transaction:
- When you add or edit a transaction, in the Document Details section, click Additional Information.
- Set Seller Importer of Record to Yes.
Include importer of record information in your bulk upload template
Include importer of record information when you import your transactions, if you had Avalara Support change AvaTax Update to use the importer of record set at the transaction level and not from Where You Collect Tax.
When you fill out your import template, use the IsSellerImporterofRecord column to specify this value for each of your transactions. Enter TRUE if you're the importer of record or FALSE if you're not.