Determine If You Are Liable For VAT
There is no clear-cut answer to whether or not you are liable for VAT as it depends on several factors. These factors include who you sell to, what you sell and where you sell it. If you are an e-commerce seller, you have to ask yourself a few questions to help understand what your VAT position is.
• Are you based outside or inside the EU?
• Are you selling to customers or businesses?
• Are you selling goods or services?
• Where are the people that you sell to, are they inside or outside the EU?
The EU VAT distance selling rules will still apply to you regardless of your answers. VATIT recommends that you note that there are a few exceptions for excise products. If you need more information regarding this, you should look at the European Commission website.
Keep Up To Date With Thresholds
If you are in the EU and selling to customers in EU member states, you need to know what your total annual sales including postage are. You also need to know if this falls below the tax threshold for the respective country. If they are under the threshold, you will not have to register for VAT.
The problem is that VAT thresholds will vary in the different member states. It is also relatively easy to hit the thresholds in certain countries. In fact, Poland has a threshold of €35,000 while you have to reach €100,000 in sales to hit the threshold in Germany.
If you are selling in multiple countries, you should look at software that will help you monitor the threshold levels. If you do not register, your sellers may become liable and this will result in some bad customer feedback. There are websites that will have all of the thresholds that you need to know about.
Storing Goods In Another European Country
If you have chosen a fulfillment center in the EU to sell your goods from, you have to be VAT registered in that country. This needs to be done regardless of whether or not it is handled through a marketplace such as Amazon.
An example of this will be the Amazon Pan EU program where goods are stored in up to 7 different EU countries. You will need to register for VAT in all 7 countries. If you fail to do this, you could face penalties, backdated payments and your account could be shut down if you use an online marketplace.
The European Commission has proposed some new standards on transparency and fairness for online marketplace platforms. This is a bid to help small and medium-sized businesses. Under these rules, if your account has been suspended, the marketplace will have to provide a statement of reason.
Keep Track Of Sales And Invoices
You need to have a system that tracks all of your sales information including the country your customer is located in. If you have problems with this, there is advanced technology that you can use as well as great software packages that will do all of this for you. Investing the right technology will make your selling process much easier. You will also stay on top of your shipping, invoices and sales data.
There Are Different VAT Rates
All of the countries in the EU have VAT, but they also have different VAT rates that are applied which you need to know about. They also have different names for the rate such as TVA in France, MWST in Germany and IVA in Spain. As the rates of VAT are different in all member states, you need to ensure that you are up to date with the language used and the details. If you have problems with this, you might need to hire an expert to help.
Know Which Rate Applies To Your Goods And Services
The classification system for VAT can vary depending on the country. This is similar to the thresholds that you need to meet and the rates will vary from 17% to 27%. You are responsible for charging the correct amount of VAT. You will be able to find a full listing of VAT on a number of websites.
How Long Does It Take To Register For VAT?
You need to leave between 3 to 10 weeks to register for VAT. Of course, the timing will be different depending on the country you are registering in. However, it is recommended that you allow the maximum amount of time.
Ensure That You Are Filing Correctly
Once you have registered, you need to ensure that you meet the deadlines and frequency of filing for each member state. This filing could be monthly, bi-monthly, quarterly, twice per year or yearly. This is something that you will need to check with the member state.
Check If You Need To Comply with Certain Reporting Requirements
If you are working with the Amazon Pan EU service, you might have to file an EC sales list. Intrastat Declarations may also be required, but you will need to check the thresholds for this to determine if you are liable.
Digital goods is a different game when it comes to VAT. VAT MOSS will be applied to sales of digital services in the EU. This will include supplying broadcasting, telecommunication, and other digital services to consumers. The European Commission has suggested a threshold for this and it is likely to be €100000.