Internet and ecommerce VAT
The explosive growth of sales to European consumers via the internet – ‘distance selling’ – is huge. E-commerce is set to account for over 20% of retail selling in EU within a few years. But it does bring responsibilities for retailers in terms of understand the VAT liabilities and charges in each EU state. Failure to do so will leave any online retailer exposed to investigations and potential fines.
Distance Selling EU VAT rules
Businesses selling goods to consumers in other countries most likely will face an obligation to charge and collect local consumption taxes. The EU has created a special regime, known as Distance Selling, to simplify the administration and burden as far as possible to encourage free trade in the zone. The basic rules are as follows:
- Retailers may initially sell to private individuals in other EU states under their local VAT number at their home VAT rate. For example, a German retailer sells handbags at the German VAT rate of 19% to French customers instead of French VAT rate of 20%
- Once they pass the respective country’s distance selling annual threshold, they must register as a non-resident VAT trader in the country. Continuing the example, if the Italian retailer sold more than €100,000 worth of goods in Germany.
- They then continue to sell, but charge the local VAT. In the example, this would mean the Italian company charging 19% VAT, which is payable to the German tax authorities through a German VAT return.
EU Distance Selling VAT registration thresholds
Each member country of the EU is free to set its own distance selling registration threshold.
You can review the details list on our Distance Selling VAT Thresholds briefing. In summary, the main countries have the following thresholds:
|€100,000 per annum||Germany, Luxembourg and Netherlands|
|€35,000 per annum||Italy, Spain, Belgium, Poland, Ireland and France|
|GBP 70,000 per annum||UK|
VAT Returns and Intrastat for E-retailers
Once VAT registered in a new country, there will be EU VAT compliance regulations to follow. These will include ensuring invoices are issued according to the local laws. Regular VAT returns will have to be submitted to the respective country/ies, and you may read more about this in our EU VAT Returns briefing.
In addition to VAT returns, retailers will may also be required to complete separate Intrastat filings. These detail the movement (dispatched) of the goods from their home state to the state of their customer. They are only required once the value of the goods goes over a certain threshold. The threshold by country can be found in our Intrastat Reporting Thresholds briefing.
- Distance selling EU VAT thresholds
- 2015 EU VAT changes to electronic B2C services
- Fulfilment by Amazon - EU VAT
- Internet and ecommerce VAT
- Non-EU companies VAT on electronic services, books, video, App's and software