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EU VAT on distance sellers under scrutiny

  • Feb 23, 2015 | Richard Asquith

EU VAT on distance sellers under scrutiny

2015 has seen an upsurge of VAT non-compliance in the distance selling sector.

It is not the long-standing large Amazon-type concerns that are under the microscope. Their EU development took place many years ago. Such was the size and spread of their business, many established their own VAT departments to accurately monitor cross-border B2C trading, ensuring all relevant local VAT was correctly invoiced, collected and paid over to the local tax authority.

No, the businesses under the spotlight are new start enterprises, enjoying surf-wave growth, not only in their own home state, but also EU wide. One can only assume some of the reasons for the non-compliance. A lack of knowledge of the EU VAT compliance requirements? Insufficient resources involved in support administration as the sales avalanche requires all hands to the pumps? A flagrant disregard for the VAT rules, based on the assumption that the foreign tax authorities will not be able to know exactly how much is being sold?

EU VAT on e-commerce

What are the VAT rules? A German on-line goods seller clearly charges German VAT to all German customers, but needs to charge Belgium VAT to Belgium consumers if its B2C sales to Belgium are greater than its €35k annual threshold. Apart from Germany, UK, Netherlands and France, on €100,000 distance selling threshold levels or thereabouts, all other countries have adopted the lower €35k or similar level. Click here for up-to-date distance selling thresholds.

It is not difficult to understand the factors of why more non-compliance is being unravelled. Internet trading continues its upward spiral, with hard pressed consumers looking further for the best deal. Cash-strapped European economies need to max out all revenue sources. At EU VAT registration, there are requests for sales declarations to be made retrospectively, and these are now being audited. VAT fraud has been high on the EU agenda, with full Member State agreement in respect of mutual cross-border assistance.

UK Distance sellers found wanting may be able to correct their misdemeanours retrospectively in terms of the VAT payment itself, but they could be hit very hard and unexpectedly by very heavy penalties imposed by EU Member State tax offices.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara