Fiscal representation: an effective alternative to setting up a company within the European Union

Is your company based outside the European Union, but you’re planning to do business there? 

If so, you’ll be subject to VAT or other reporting obligations within the EU. To ensure your operations are compliant within the European Union, you have two options:

• Setting up a company within the European Union comes with numerous administrative and legal obligations.
• Appointing a fiscal representative established in the European Union, who will handle your VAT obligations related to your operations in these countries.. Cette solution vous permettra de vous concentrer sur le développement de votre activité.

Advantage #1: Appointing a tax representative simplifies your procedures.

Reduced formalities

Setting up a company involves navigating various administrative and legal hurdles, including several key steps: drafting articles of association, registering with the Commercial Register, and appointing a board of directors. Once the company is established, you’ll also be required to maintain proper accounting records, which typically means hiring a chartered accountant in a country that isn’t your own.

On the other hand, appointing a fiscal representative involves significantly fewer formalities. This approach is often seen as a ” light structure ” that can be established quickly and easily. Fiscal representation allows a foreign company to register for VAT in one or more European Union countries, and operate as if it were locally established , but without the associated drawbacks. For instance, your company’s taxation will remain in your country of residence. Additionally, this solution simplifies exiting a market if your expansion does not meet expectations.

Fewer obligations

There are many legal obligations involved in setting up a company:

• Keeping accounts, holding annual general meetings, approving accounts, publishing annual financial statements…
• The company must comply with the formalities required for documents issued in accordance with local legislation.
• New obligations related to the European reform on the introduction of electronic invoicing.
• Conducting a study of local regulations and an analysis of how this reform is implemented to ensure compliance with local law represents a significant cost for companies.

Conversely, appointing a fiscal representative does not require full compliance with local legal regulations. The tax representative will manage the accounting on your behalf.

For several years, the European Union has been moving towards various electronic invoicing systems (e-invoicing) to combat VAT fraud. For the time being, however, the new regulations only apply to established companies. Non-established companies that are VAT-registered (i.e., those under fiscal representation) are not yet impacted by the e-invoicing reform. This provides a significant advantage in terms of development costs for companies opting for fiscal representation.

Local domiciliation is possible with fiscal representation

The main obstacle to fiscal representation is often linked to the degree of market penetration. Generally, when companies aim to enter a new market, they seek to establish a local presence with an address and contact details in the target country. This enhances their credibility with customers.

Although appointing a fiscal representative does not provide you with a local address, there is a straightforward solution to this issue.

All you need to do is combine fiscal representation with domiciliation services offered by third-party companies. This allows you to benefit from a local VAT number, address, and/or telephone number. This straightforward solution enables you to operate as a local company without the associated drawbacks.

Advantage #2: tax representation is less expensive than setting up a company

Setting up a company can be expensive: you’ll need to pay a minimum capital, incur recurring administrative costs (such as accounting and audits), and the company will also be subject to various local taxes applicable to resident businesses. These taxes may include income tax, property tax on developed properties, and the territorial economic contribution (“contribution économique territoriale” – CET), which comprises the “cotisation foncière des entreprises” (CFE) and the “cotisation sur la valeur ajoutée des entreprises” (CVAE)

The cost of appointing a fiscal representative is significantly lower. Since there is no locally established entity in this setup, there are no local taxes to pay. Additionally, there is no need to maintain separate accounts.

Fiscal representation ensures lower-cost development, making it easier for companies to test new markets. With reduced expenses, reaching break-even becomes much more attainable.

Advantage #3: Deploy your business with greater flexibility through tax representation.

Entrusting the management of your tax obligations to a tax representative will not only save you time and money but also allow you to adapt and grow in various European markets. Your tax representative will handle your obligations across the different member states of the European Union.

This flexibility also extends to terminating the business. It is generally less costly to end a fiscal representation agreement than to dissolve a company. In the case of company dissolution, numerous legal steps are required, such as registering the deed of dissolution, publishing a notice, appointing a liquidator, and more. These processes can be lengthy and cumbersome.

Advantage #4: Tax representation expertise ensures compliance across Europe.

Tax legislation varies significantly from one country to another, even within the European Union. By appointing a tax representative, you choose a partner who is an expert in the legislation of their respective country. This ensures that your operations comply with local laws and regulations.

Not all companies have a specific in-house department specializing in tax regulations ; by working with a representative, your equip yourself with the expertise needed to ensure smooth and compliant business development.

To perform their role effectively, the tax representative will need to analyze all financial flows to ensure tax and legal compliance with reporting and VAT obligations. They will closely monitor all regulatory provisions and notify you of any changes in regulations that could impact your business.

A professional based outside the European Union might require tax representation in multiple EU countries. This could result in having different contacts for each of these representations.

That’s why EASYTAX supports you with your VAT obligations and issues in all EU countries, offering you a single point of contact to handle all your EU obligations. A simple, reliable and efficient representation with exchanges throughout the process.