Ecommerce & VAT rates in the EU<\/h2>\n
Different VAT rates apply in different EU member states. They can range from the reduced 0% VAT rate in Belgium to 27% in Hungary. You can check the VAT rates online<\/a>, but it\u2019s good to confirm the latest rates with your local VAT office.<\/p>\n Each country has a standard rate applying to most supplies. The EU gives freedom to the 28 member states to set their standard VAT rates, but not lower than 15%. The lowest standard VAT rate throughout the EU is 17%.<\/p>\n Reduced rates (2 maximum) may apply to a limited variety of sales. Normally they cannot go below 5%.<\/p>\n Some countries apply a super-reduced rate below 5% on some sales. For instance, there\u2019s a super-reduced rate of 4% in Spain applied to certain services, e.g. maintenance of means of transport for people with disabilities.<\/p>\n Some countries apply zero rates on certain sales. In the case of zero rates, consumers don\u2019t have to pay VAT. However, you still have the right to deduct the VAT you\u2019ve paid on purchases directly related to the sale.<\/p>\n Some countries are allowed to apply specific special rates on some sales. A parking rate applies to some goods and services that are not eligible to a reduced rate.<\/p>\n When goods or services are sold (and sent) to a private person in a different member state, the buyer usually pays VAT to the seller. VAT is not paid in the buyer’s country. VAT is not due in the buyer’s country when the value of goods sold doesn\u2019t exceed the distance selling threshold<\/a>.<\/p>\n However, the seller’s annual sales to the buyer’s country may exceed a threshold (that varies by country). This is related to the distance selling rules<\/strong>. When this is the case, the seller must register and obtain a VAT number in the country where the threshold was exceeded. Then the seller has to declare and pay the VAT in that particular country (charge VAT in the buyer’s country).<\/p>\n Let\u2019s say, a seller in one member state sells goods directly to VAT-exempt organizations and individuals in another member country. Further, in any 12 consecutive months the aggregate value of goods sold to consumers in that member state is below \u20ac100,000<\/strong> (or the equivalent; this value also depends on the destination country). Thanks to distance sales treatment, sellers can apply domestic place of supply rules to determine which member state collects VAT. In other words, VAT is charged at the rate applicable in the exporting country.<\/strong><\/p>\n If the value of goods sold to final consumers in a member state exceed \u20ac100,000<\/strong>, the exporting seller must charge VAT at the rate applicable in the importing country.<\/p>\n There\u2019s also a special threshold amount of \u20ac35,000<\/strong>. This can be the case if the importing country fears that competition would be distorted without the lower threshold amount.<\/p>\n A Polish merchant sells TV sets to Germany. In the beginning the value of the goods the seller sells is below the threshold (\u20ac100,000). As a result, the Polish VAT rate is applied (23%), for example \u20ac100 net product price + 23% VAT paid in Poland = \u20ac123 in total.<\/p>\n At some point in the same fiscal year, the same Polish seller may sell so many products in Germany that the threshold (\u20ac100,000) is exceeded. Then the seller has to register for a VAT number in Germany and will now apply the German 19% VAT rate. As a result, the total product price will be \u20ac119 = \u20ac100 net product price + 19% VAT paid in Germany.<\/p>\n Goods imported from non-EU countries are subject to VAT and duties at the rate applicable in the member state to which the goods are imported. Normally VAT is charged at the border, along with customs duty.<\/p>\n However, there\u2019s an exception (Low Value Consignment Relief) in the case of low-value shipments. It has to do with de minimis value: the threshold from which the imported goods are subject to duties.<\/p>\n VAT paid on importation is treated as input VAT, the same as VAT on domestic purchases.<\/p>\n Companies operating across the EU may have to register their business with a VAT number in another EU country. Requirements vary from country to country, but are based on the EU\u2019s VAT Directive.<\/p>\n Foreign merchants may have to register for a local VAT number in the following cases:<\/p>\n It\u2019s also worth mentioning FBA (Fulfillment by Amazon): if the seller wants to store goods in a given country, they first need to register for VAT.<\/p>\n These requirements apply equally to companies from both within and outside the EU. Normally, non-resident companies must register for VAT immediately. It\u2019s important to check out resident companies\u2019 VAT registration thresholds.<\/p>\n The good news is that the EU strives to harmonize the European VAT system. It\u2019s down to the drive towards an EU single market for goods and services. As a result, the VAT registration requirements should be uniform in each country.<\/p>\n In the single market there\u2019s a co-ordinated administration of VAT within the EU VAT area.<\/p>\n Cross-border VAT is declared in the same way as domestic VAT.<\/p>\n This saves costs, simplifies administrative work, reduces delays and generally facilitates the elimination of border controls between member countries.<\/p>\n In December 2017, the finance ministers of the EU agreed on new tax rules. The goal was to simplify regulations and make it easier for online businesses to comply with VAT obligations.<\/p>\n In the future (upcoming years), online retailers won\u2019t have to register for VAT in each EU country. Instead, they\u2019ll be able to file a single tax return for the entire EU.<\/p>\n The expected benefits of this move include:<\/p>\n Companies must be VAT (EU companies) or tax (non-EU companies) registered. Then, they\u2019ll need to complete and submit a local VAT registration form and supporting documentation.<\/p>\n The application form is likely to be in the local language<\/strong>. There\u2019s a reluctance towards using document translations to prevent misunderstandings.<\/p>\n Supporting documentation typically includes:<\/p>\n After submitting the application, it\u2019ll take 2-8 weeks to receive a VAT number, depending on the country. Each country has its own number formats and you can review them in the EU VAT Number Format<\/a> briefing.<\/p>\n To prevent VAT fraud, the tax authorities may ask further questions. There can be additional requirements in certain countries.<\/p>\n When the company has received the VAT number, it can start trading and charging VAT on its foreign transactions.<\/p>\n Mini-One-Stop-Shop (MOSS) is a single VAT reporting Internet portal that enables quarterly filings by e-services providers covering all EU countries.<\/p>\n MOSS was created to:<\/p>\n EU companies can register with the portal in their EU country of residence. After successful application, they\u2019ll get access to the online portal.<\/p>\n Quarterly VAT returns are due by the 20th of the month following the quarter end. Then it\u2019s the responsibility of the receiving tax authority to divide up the VAT received and transfer it to the relevant member states of the consumers.<\/p>\n Output VAT, i.e. VAT on its output supplies, is charged by a business and paid by its customers.<\/p>\n Input VAT, e.g. VAT on its input supplies, is paid by a business to other businesses on the received supplies.<\/p>\n Input VAT can be recovered by being offset against the output VAT for which the business is required to account to the government. In the case of an excess, by claiming a repayment from the government.<\/p>\n The final consumer doesn\u2019t get a credit for the VAT paid. What\u2019s the net effect of this? Each supplier in the chain remits tax on the value added. Ultimately the end consumer pays the tax.<\/strong><\/p>\n Each member state has its own reporting threshold. These are Intrastat declarations<\/strong>: mandatory statistical returns allowing the tax authorities to monitor the movement of goods within the EU.<\/p>\n EC Sales Lists (ESLs)<\/strong> document intra-community B2B sales and stock movement between EU countries to manage the movement of taxable supply. They\u2019re filed in the outbound country with the VAT return.<\/p>\n Before shipping goods to Europe, you\u2019ll need to apply for EORI<\/strong>: European Operator Identifier Number (linked to your VAT number). It allows customs officials in Europe to identify your shipments and issue documentation allowing you to reclaim the import VAT paid at customs.<\/p>\n To understand which country\u2019s VAT rules should apply to the transaction, a place of supply of goods\/services must be determined.<\/p>\n For goods, the place of supply can be:<\/p>\n The Tax Point<\/strong> is the point in time when the VAT tax falls due. It\u2019s usually when the goods\/services are delivered to the customer. The taxable amount includes any duties and incidentals, but excludes VAT. For imports, it\u2019s the same value as declared for customs\u2019 purposes.<\/p>\n If you make exempt supplies, you\u2019re a taxable person, but not an accountable person. You\u2019re not entitled to register for VAT unless you also make taxable supplies. Some goods and services, such as healthcare, education and financial services may be exempt from VAT, without the right to deduct.<\/p>\n There\u2019s a difference between goods\/services exempt from VAT and those subject to 0% VAT.<\/p>\n The seller of exempt goods isn\u2019t entitled to reclaim VAT on business purchases, contrary to the 0% VAT case.<\/p>\n Consider this example. A book manufacturer from Ireland purchases paper including VAT (23%) and sells books at the 0% rate. This manufacturer can reclaim the VAT paid on the paper as the business is making taxable supplies.<\/p>\n Now think about non-profit organisations, e.g. sports clubs, in countries like Finland and Sweden. They\u2019re exempt from all VAT and must pay full VAT for purchases without reclaim.<\/p>\n Webinterpret supports merchants selling on eBay.<\/span><\/p>\n Our AI-based solutions enable more effective selling through automated listing <\/span>localization<\/span><\/a>, <\/span>advertising<\/span><\/a>, and <\/span>returns<\/span><\/a> and ensure all products placed on EU markets are <\/span>GPSR-compliant<\/span><\/a>. We support sellers in Europe and other continents.<\/span><\/p>\nStandard rate<\/strong><\/h3>\n
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Reduced rate<\/strong><\/h3>\n
Super-reduced rate<\/strong><\/h3>\n
Zero rate<\/strong><\/h3>\n
Special & parking (intermediary) rates<\/strong><\/h3>\n
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International ecommerce & distance sales regulations<\/h2>\n
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<\/a><\/p>\nVAT in international ecommerce: practical example<\/h3>\n
Importation of goods from non-EU countries<\/h3>\n
EU VAT number registration<\/h2>\n
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The simplification of VAT rules for ecommerce sellers<\/h3>\n
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How to get a European VAT number<\/h2>\n
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MOSS VAT returns<\/h2>\n
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Output & input VAT<\/h2>\n
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Intrastat, ESLs, EORI, place of supply & Tax Point<\/h2>\n
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Exemption from VAT vs. 0% VAT<\/h2>\n
Sell more on European marketplaces in 2020 & beyond<\/h2>\n