Understanding Notional VAT for EU B2B Transactions
Notional VAT applies to B2B sales, purchases, and reverse charges on services within the European Union (EU).
For cross border transactions between EU countries, you only charge VAT only to buyers who aren't tax registered. This can include individual consumers, but sometimes companies too. However, for B2B transactions with VAT registered companies, you use a zero rated tax for sales transactions if the buyer is VAT registered in another EU country. For example, you're a seller in the UK and your buyer's in Germany.
Notional VAT is only used for tax reporting. For a B2B transaction with a zero rated tax, the customs or tax authorities need to know what the tax amount would have been if VAT had been charged. This amount is the notional amount. No cash is paid or received. It's not on any bill or invoice, and doesn't affect your G/L impact in NetSuite.
For more information, see How NetSuite Determines the Notional Tax Code to Use for a Transaction.
Each EU nexus you do business in needs the right tax codes set up. For a list of tax codes, see the country tax topic for each EU member state.