RUN SAP BETTER
European Union
European Union
The EU is characterised by its cultural and linguistic diversity, which EU citizens can move freely between member states to live, work, study or retire in another country.
As a political entity, the European Union has two original core objectives, development of a common market, subsequently becoming a single market, and a customs union between its member states.
-
EU Capital: Brussels in Belgium (Considered Capital)
-
EU Flag: It consists of a circle of 12 golden stars on a blue background
-
EU Languages: 24 official languages. 3 main languages (English, French and German)
-
EU Financial Reporting: IFRS (Under EU rules, listed companies must prepare their consolidated financial statements in accordance with IFRS)
-
EU Major Institutions:
-
Brussels, Belgium: Commission, European Council, Council of the EU, Parliament
-
Frankfurt, Germany: European Central Bank
-
Luxembourg City, Luxemburg: Court of Auditors, Court of Justice, Council of the EU, Secretariat of the Parliament, Commission
-
Strasbourg, France: Parliament (Primary)
EU Taxation | VAT
Value Added Tax (VAT) is an indirect tax levied on goods and services across Europe and worldwide. The European Union (EU) has mandated VAT tax for all its member states, which are required to implement and enforce it in accordance with the EU VAT code.
The EU itself does not directly collect VAT tax; instead, it has established a comprehensive VAT code that regulates the collection and enforcement of VAT by each member state. This ensures consistency and fairness in VAT collection across the EU, while allowing member states some flexibility in setting their own VAT rates.
In the early days of the EU, VAT was introduced at a standard rate of 10%, which gradually increased over the years. The standard rate of 10% VAT was applicable to all the EU member states when VAT was first introduced in 1967. France was the first country to implement VAT, but the standard rate of 10% was applied across all member states at that time. Currently, EU member states have different VAT rates for different types of goods and services.
Warning: These rates are indicative only. Please use it as an example. Updated: 2023
Country | Standard VAT Rate | Intermediate | Reduced | Super Reduced | First Reduced | Second Reduced | Thrid Reduced |
|---|---|---|---|---|---|---|---|
Austria | 20% | 13% | 10% | ||||
Belgium | 21% | 6% | 12% | ||||
Bulgaria | 20% | 9% | |||||
Croatia | 25% | 13% | 5% | ||||
Cyprus | 19% | 9% | 5% | ||||
Czech Republic | 21% | 15% | 10% | ||||
Denmark | 25% | ||||||
Estonia | 20% | 9% | 5% | ||||
Finland | 24% | 14% | 10% | ||||
France | 20% | 10% | 5.5% | 2.1% | |||
Germany | 19% | 7% | |||||
Greece | 24% | 13% | 6% | ||||
Hungary | 27% | 13.5% | 9% | 4.8% | |||
Ireland | 23% | 13.5% | 9% | 4.8% | |||
Italy | 22% | 10% | 5% | 4% | |||
Latvia | 21% | 12% | 5% | ||||
Lithuania | 21% | 9% | 5% | ||||
Luxembourg | 16% | 13% | 7% | 3% | |||
Malta | 18% | 7% | 5% | ||||
Netherlands | 21% | 9% | |||||
Poland | 23% | 8% | 5% | ||||
Portugal | 23% | 13% | 6% | ||||
Romania | 19% | 9% | 5% | ||||
Slovakia | 20% | 10% | |||||
Slovenia | 22% | 9.5% | 5% | ||||
Spain | 21% | 10% | 4% | ||||
Sweden | 25% | 12% | 6% |
Setting up a European Company
Incorporation is the process by which a new or existing business registers as a limited company. A company is a legal entity with a separate identity from those who own or run it. The vast majority of companies are limited liability companies where the liability of the members is limited by shares or by guarantee.
This is a macro level overview to understand what to consider when you want to open a business in the European Union. What are the points you need to take into account from an accounting, legal and tax point of view.
There are many benefits to having a company in EU. It provides a single market with millions of consumers, and the possibility to expand and reach new markets.
Key Advantages
-
One of the largest markets in world
-
A very stable economy
-
Accessibility to a good financial instruments
-
Large pool of skilled workers
-
Simple and favourable tax regimes
Keep in mind, there are many other points that need to be considered. It may be worthwhile seeking professional advice from a solicitor or accountant before deciding whether an incorporated company is the best way for you to run your business.
Comparison table of some European Union Countries
Country | Czechia | Hungary | Poland | Slovakia |
|---|---|---|---|---|
Capital City | Prague | Budapest | Warsaw | Bratislava |
Language | Czech | Hungarian | Polish | Slovak |
EU Member | Since 2004 | Since 2004 | Since 2004 | Since 2004 |
Schengen Member | Yes | Yes | Yes | Yes |
Population | 11 Million | 10 Million | 38 Million | 5.5 Million |
Area (KM²) | 79,000 | 93,000 | 312,000 | 49,000 |
Currency | CZK | HUF | PLN | EUR |
Corporate Tax | 19% | 9% | 9% ³ | 21% ² |
Dividend Tax ¹ | 15% | 15% | 19% | 7% |
VAT (Standard Rate) | 21% | 27% | 23% | 20% |
Limited Company (LLC) | S.R.O. | KFT | SP. Z.O.O | S.R.O |
Incorporation Time | 2-5 Days | 4-5 Days | 3-4 Weeks | 3-4 Weeks |
Minimum Share Capital | 1 EUR | 8K EUR | 1,250 EUR | 5K EUR |
Remote Incorporation | Yes | Yes ⁴ | Yes | Yes |
EU VAT Number | 2 Months | Immediately | 1-2 Months | 30 Days |
Local Address | Yes | Yes | Yes | Yes |
Local Accountant | Yes | Yes | Yes | Yes |
1 Dividend tax only applies to individuals who are tax residents in the given country.
2 If the company’s revenue remains below EUR 50,000, the corporate tax is 15%.
3 If the revenue exceeds EUR 2M. the corporate tax is 19%.
4 Travels may be required for company bank account opening.
Warning: Take this comparison table below as an example only. The laws and taxations are dynamic and change very often.
EU Countries
Austria
ISO Codes: AT / AUT
Country Codes: +43
Capital: Vienna
Official language(s): German
EU member country: since 1 January 1995
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 1 December 1997
Belgium
ISO Codes: BE / BEL
Country Codes: +32
Capital: Brussels
Official language(s): Dutch, French and German
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Bulgaria
ISO Codes: BG / BGR
Country Codes: +359
Capital: Sofia
Official language(s): Bulgarian
EU member country: since 1 January 2007
Currency: BGN (Bulgarian Lev). Bulgaria has committed to adopt the euro once it fulfils the necessary conditions.
Schengen: Bulgaria is currently in the process of joining the Schengen area.
Croatia
ISO Codes: HR / HRV
Country Codes: +385
Capital: Zagreb
Official language(s): Croatian
EU member country: since 1 July 2013
Currency: EUR (Euro). Euro area member since 1 January 2023
Schengen: Schengen area member since 1 January 2023
Cyprus
ISO Codes: CY / CYP
Country Codes: +357
Capital: Nicosia
Official language(s): Greek
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2008
Schengen: Cyprus is currently in the process of joining the Schengen area.
Czechia
ISO Codes: CZ / CZE
Country Codes: +420
Capital: Prague
Official language(s): Czech
EU member country: since 1 May 2004
Currency: CZK (Czech Koruna). Czechia is currently preparing to adopt the euro.
Schengen: Schengen area member since 21 December 2007
Denmark
ISO Codes: DK / DNK
Country Codes: +45
Capital: Copenhagen
Official language(s): Danish
EU member country: since 1 January 1973
Currency: DKK (Danish Krone). Denmark has negotiated an opt-out from the euro and thus is not obliged to introduce it.
Schengen: Schengen area member since 25 March 2001
Estonia
ISO Codes: EE / EST
Country Codes: +372
Capital: Tallinn
Official language(s): Estonian
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2011
Schengen: Schengen area member since 21 December 2007
Finland
ISO Codes: FI / FIN
Country Codes: +358
Capital: Helsinki
Official language(s): Finnish, Swedish
EU member country: since 1 January 1995
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 25 March 2001
France
ISO Codes: FR / FRA
Country Codes: +33
Capital: Paris
Official language(s): French
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Germany
ISO Codes: DE / DEU
Country Codes: +49
Capital: Berlin
Official language(s): German
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Greece
ISO Codes: GR / GRC
Country Codes: +30
Capital: Athens
Official language(s): Greek
EU member country: since 1 January 1981
Currency: EUR (Euro). Euro area member since 1 January 2001
Schengen: Schengen area member since 1 January 2000
Hungary
ISO Codes: HU / HUN
Country Codes: +36
Capital: Budapest
Official language(s): Hungarian
EU member country: since 1 May 2004
Currency: HUF (Hungarian Forint). Hungary is currently preparing to adopt the euro.
Schengen: Schengen area member since 21 December 2007
Ireland
ISO Codes: IE / IRL
Country Codes: +353
Capital: Dublin
Official language(s): Irish, English
EU member country: since 1 January 1973
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Ireland has negotiated an opt-out from Schengen area.
Italy
ISO Codes: IT / ITA
Country Codes: +39
Capital: Rome
Official language(s): Italian
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 October 1997
Latvia
ISO Codes: LV / LVA
Country Codes: +371
Capital: Riga
Official language(s): Latvian
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2014
Schengen: Schengen area member since 21 December 2007
Lithuania
ISO Codes: LT / LTU
Country Codes: +370
Capital: Vilnius
Official language(s): Lithuanian
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2015
Schengen: Schengen area member since 21 December 2007
Luxembourg
ISO Codes: LU / LUX
Country Codes: +352
Capital: Luxembourg
Official language(s): French, German
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Malta
ISO Codes: MT / MLT
Country Codes: +356
Capital: Valletta
Official language(s): Maltese, English
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2008
Schengen: Schengen area member since 21 December 2007
Netherlands
ISO Codes: NL / NLD
Country Codes: +31
Capital: Amsterdam
Official language(s): Dutch
EU member country: since 1 January 1958
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Poland
ISO Codes: PL / POL
Country Codes: +48
Capital: Warsaw
Official language(s): Polish
EU member country: since 1 May 2004
Currency: PLN (Polish Zloty). Poland is currently preparing to adopt the euro.
Schengen: Schengen area member since 21 December 2007
Portugal
ISO Codes: PL / POL
Country Codes: +48
Capital: Lisbon
Official language(s): Portuguese
EU member country: since 1 January 1986
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Romania
ISO Codes: RO / ROU
Country Codes: +40
Capital: Bucharest
Official language(s): Romanian
EU member country: since 1 January 2007
Currency: RON (Romanian Leu). Romania has committed the euro once it fulfils the necessary conditions.
Schengen: Romania is currently in the process of joining the Schengen area.
Slovakia
ISO Codes: SK / SVK
Country Codes: +421
Capital: Bratislava
Official language(s): Slovak
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2009
Schengen: Schengen area member since 21 December 2007
Slovenia
ISO Codes: SI / SVN
Country Codes: +386
Capital: Ljubljana
Official language(s): Slovenian
EU member country: since 1 May 2004
Currency: EUR (Euro). Euro area member since 1 January 2007
Schengen: Schengen area member since 21 December 2007
Spain
ISO Codes: ES / ESP
Country Codes: +34
Capital: Madrid
Official language(s): Spanish
EU member country: since 1 January 1986
Currency: EUR (Euro). Euro area member since 1 January 1999
Schengen: Schengen area member since 26 March 1995
Sweden
ISO Codes: SE / SWE
Country Codes: +46
Capital: Stockholm
Official language(s): Swedish
EU member country: since 1 January 1995
Currency: SEK (Swedish Krona). Sweden has committed the euro once it fulfils the necessary conditions.
Schengen: Schengen area member since 25 March 2001
References: European Union (european-union.europa.eu); Global VAT Compliance (www.globalvatcompliance.com); Helpers Central Europe (helpers-europe.com); HM Revenue & Customs (www.gov.uk); Wikipedia (www.wikipedia.org); Investopedia (www.investopedia.com)