Certain tax authorities do not allow direct VAT registration by non‐established businesses and require the appointment of a local fiscal representative as part of the VAT registration process. In the case of the EU, fiscal representation is required in the majority of countries when the business registering is established outside of the EU.
A fiscal representative is a company that resides in the country where VAT registration is required. The fiscal representative often has to be approved by the local tax authority to perform this service. The role of the fiscal representative is to represent the non‐resident company in VAT matters. As the two companies will share joint liability for any tax or penalties that might be due, fiscal representatives often require some sort of bank guarantee or monetary deposit. This guarantee will remain in place for the period of the trading and some period thereafter, in case the tax authority later finds compliance issues or outstanding liabilities. The fiscal representative will also want to reduce any potential liability issues by ensuring that their customers are fully VAT compliant, they often ensure this by requesting frequent audits.