VAT is a form of tax paid by the companies involving in trading of goods and services towards the tax officials. Even the businesses operating in other countries require paying the VAT before starting their operations. European countries have their different EU VAT Directive in which there are tax regulations relating to import/export of goods and services. VAT deferment is a tax exemption system for the foreign companies who are involved in import operations with the European countries.
When a non-resident company is importing their goods in one of the EU country they are eligible to delay their payment of VAT towards the tax authorities known as VAT deferment system. The VAT deferment system is available for any foreign company importing their goods in the EU. Whenever the goods are imported in the EU, the company has to pay the VAT and custom duties immediately. But due to the VAT deferment system in some of the EU countries, there is a temporary extension permitted for the payment of VAT so that the non-resident company can start their operations with ease.
In the VAT deferment system the company can pay the VAT returns on the goods imported after some time period. Some of new companies need to provide minimum guarantee for the deferment of the VAT towards the tax officials. The guarantee should be from the banks or insurance firms. For this it is generally recommended to appoint a local tax representative so that they act on company’s behalf for the procedure related to VAT payments.