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Companies selling goods across Europe via online shop platform (e-commerce) to individuals need to deal with VAT [Indirect Tax].

Managing VAT obligations correctly can help your company to optimize its revenues. [VAT shouldn’t be a loss for your organization]. By contrary, non-compliant organizations face risks involving payment of VAT [from 17 to 27%], possible double taxation [in your country and in the country of your clients], penalties and late payment interests.

Distance Selling Rules

Distance selling in the E.U. occurs when goods[1] are dispatched or transported for or on behalf of a supplier to one EU country to a person who is not registered for VAT [mainly private individuals]. It includes mail order sales, phone or tele-sales or physical goods ordered over Internet [through a web shop of the company or via e-platform like Amazon].

Your company selling goods to individuals across E.U. need to adopt the following VAT rules:

  • VAT is due in your country [country of dispatch of transport] provided that the threshold of the country of the customer is not reached;
  • Where sales exceed the threshold in any particular EU country, your company must register and account for local VAT in that country. Under the EU VAT arrangement, Member States were required to adopt a distance sales threshold of either € 35,000 or € 100,000;
  • If the threshold is not exceeded, your company may, nevertheless, opt to register and account for local VAT on its distance sales.

Your company should monitor carefully its sales and verify when the threshold in one specific EU country is exceeded. See Threshold Limit for Distance Sales in each EU country.

VAT Obligations in your Clients’ Countries

As soon as the volume of your distance sales goes over the threshold in one EU country, your company has to register for VAT in this country. Once VAT registered, you will be obliged to:

  • Issue proper invoices and calculate local VAT due on the distance sales;
  • File local periodical VAT returns;
  • Make payment of any local VAT due, within the prescribed time limit;
  • Keep proper records so as to enable the local VAT liability to be determined;
  • Make those records available for inspection by local VAT Authorities on request.

Note that the VAT registration might also be needed if you’re using several stocks or inventories to serve different countries. For example, using the Amazon platform, your goods could deliver from stocks in Germany, France, Poland, Czech Republic, etc. and VAT registration might be needed in all those countries.

Your company should pay attention to local VAT rules [procedure for VAT registration in a country and declaration of local VAT vary from country to country]: VAT registration process, mandatory information on invoices, filing periodical VAT returns, payment of VAT to local Treasury, VAT de-registration process, etc.

E-commerce: Check-list for VAT

Companies selling goods via Internet to private individuals must pay attention to the following issues:

  • Monitoring their sales and verify when the threshold is exceeded in one country [Sales  to customers who are VAT registered don’t count as distance sales];
  • Proceeding with the local VAT registration and charging local VAT in case the threshold is exceeded;
  • Checking whether the local VAT is lower than the VAT rate applicable in their country and if affirmative, proceeding with a voluntary local VAT registration.

How can we help you?

European VAT Desk, as a V.A.T. specialist, focuses on helping EU and non-EU companies to cope with all the VAT issues they may face in connection with e-commerce.

Our global VAT solution includes 3 steps:

  • VAT Road Map and possible optimization of your activities
  • VAT registration
  • Management of all your local V.A.T. obligations

[1] Sales of goods ordered via the internet but physically supplied are considered to be distance sales for VAT purposes. However digitized goods i.e. downloads by the customer via the internet are considered to be electronic services and follow other regulations.