Non-resident & resident VAT registration

Introduction

Value Added Tax (VAT) and Goods and Services Tax (GST) are consumption taxes levied in over 170 countries worldwide. Unlike sales tax, applied only at the point of final sale, VAT/GST is charged at each stage of the supply chain, from raw materials through to the end consumer. Registered businesses charge VAT/GST on their sales (output tax) and recover the VAT/GST paid on their purchases (input tax), remitting only the net difference to the tax authority. This mechanism ensures the tax burden ultimately falls on the final consumer, while also creating a self-enforcing audit trail, since each business in the chain has a financial incentive to obtain proper documentation from their suppliers in order to support their input VAT/GST recovery.

The above generally applies to resident or domestically established entities that have a permanent establishment for VAT/GST purposes. A permanent establishment is typically characterized by a fixed physical presence in a country, which can take various forms such as a dedicated server, a branch office, a data center, or a physical warehouse for goods.

However, due to the growing digital goods space, including electronically supplied services (ESS), a majority of countries around the world have enacted digital services rules to capture the VAT/GST on these transactions. To date, more than 115 jurisdictions have implemented VAT/GST ESS rules that are aimed at specifically taxing non-resident suppliers of ESS. 

Non-resident registration

A non-resident entity — often referred to as "non-local" — is a business that falls within the scope of ESS rules. Under these rules, relevant countries require businesses to register under a simplified VAT/GST regime designed specifically for non-resident suppliers.

Under these regimes, businesses register to collect and remit VAT/GST on their sales only, but are generally unable to recover input VAT/GST, as they operate under a simplified registration scheme rather than a full domestic registration. These simplified regimes also tend to offer more modern platforms with less complex reporting requirements. They often issue distinctive VAT/GST registration numbers, a common indicator of simplified registration. For example, in Canada (Federal) and Canada (Quebec), simplified registration numbers contain RT9999 or NR.

To illustrate, a US company selling ESS globally may need to register under several country-specific schemes, such as:

• EU — Non-Union One Stop Shop (OSS)
• Australia — Simplified GST Registration
• Malaysia — Service Tax on Digital Services (SToDS)
• Norway — VAT on Electronic Services (VOES)

In each case, the seller registers and remits tax solely on its sales, subject to the applicable B2C and B2B rules in that jurisdiction. For non-resident entities, many countries require VAT/GST to be handled differently depending on the customer type. In certain jurisdictions, B2C sales are taxed and remitted by the non-resident seller, while B2B transactions can be subject to the reverse charge mechanism, which shifts the obligation to account for tax to the buyer. This applies in regions such as the EU, Australia, and the UK (see our VAT Index for a full list of applicable countries and rules). Importantly, to support the application of the reverse charge to B2B transactions, the seller must obtain and validate the B2B customer's VAT ID.

The key distinction between a non-resident entity and a locally established business is that simplified non-resident registrations are designed for the collection and remittance of VAT/GST on sales. As a result, businesses registered under these regimes generally cannot recover input VAT/GST, unlike locally registered entities that operate under the full domestic VAT framework.
 

Resident registration

A resident entity — referred to as "local" or "domestic" — is a business that has a permanent establishment for VAT/GST purposes in a country. A permanent establishment is typically characterized by a fixed physical presence, which can take various forms, such as a dedicated server, a branch office, a data center, or a physical warehouse for goods.

Unlike non-resident entities registered under simplified regimes, a locally established business is subject to the full domestic VAT/GST framework. This means the business is required to collect and remit tax on both B2B and B2C transactions, file more comprehensive VAT/GST returns, and, importantly, has the right to claim input VAT/GST on eligible business expenses. This ability to recover input tax is one of the most significant distinctions between local and non-resident registrations. As a result, they will be issued a standard VAT/GST registration number.

For example, a business with a permanent establishment in Canada would register for a full GST/HST account (identified by an RT0001 registration number at the federal level) or, if operating in Quebec, register separately for QST (identified by a TQ registration number). In both cases, the business is subject to the full domestic regime, including the obligation to charge tax on all taxable supplies and the ability to claim input tax credits on its returns, as well as other supplementary returns that must be filed on a periodic basis, where applicable.  

Key takeaways

Understanding the differences between non-resident and resident VAT/GST registration is essential for businesses operating across borders. Non-resident entities typically register under simplified regimes that allow them to collect and remit tax on sales but do not allow input VAT/GST recovery. Resident entities, by contrast, operate under the full domestic framework, with broader filing obligations but also the right to recover input tax on eligible expenses.