Going global? Here's how VAT works on international e-commerce sales...
Open a store on the high street and your local ‘catchment area’ might extend a few miles. Sell online, and well, the world is your oyster.
If you’re planning on going global with your e-commerce empire though, you’ll need to become au fait with the raft of regulations that come with international trading.
For instance, even if your business is based here in the UK, you might need to register for VAT in a whole range of other countries if you’re shipping products to international customers.
In this blog post, we’ll look at when and why you might need to register for VAT abroad, and how to go about it. If you’d like to find out more, download a copy of our e-commerce ebook.
Do I need to register for VAT abroad?
Assuming your e-commerce business is based in the UK, you’re obliged to become VAT registered if your turnover reaches (or you know it will reach) £85,000 per year.
However, if you’re selling into other EU countries, you may well need to become VAT registered in those regions too.
Sales into other EU countries are termed as ‘distance sales’, and every country has its distance sales threshold. For most EU countries, that threshold is set at €35,000, but there are exceptions. Germany’s threshold, for instance, is €100,000.
Reach that annual sales threshold in terms of goods sold, and you’re compelled to register as a non-resident VAT trader in the country.
As well as registering for VAT in the country where your products are headed, you’ll also need to register in the country they’re being distributed from. That means if you’re using a fulfilment centre outside of the UK to make sales to mainland Europe a lot simpler, you’ll also need to become VAT registered in the country of that distribution centre.
So, if you’re based in the UK, but selling in large volumes to Spain via a fulfilment agent in France, you’ll need to register for VAT in all three countries.
How do I register for VAT abroad?
Recognising the potential complexity of this challenge, large fulfilment networks like Amazon have moved to make international VAT registration as easy as possible, allowing you simply to sign up for a VAT number in any given country from within your seller account.
It’ll cost you, of course, with a subscription (currently around €400) to pay per country, per year - but if you’re selling via Amazon already, it’s a simple way to ensure your obligations are fulfilled.
If you’re not partnered with a fulfilment service like Amazon, then you’ll need to familiarise yourself with the VAT application process in each relevant country, preferably before you hit the sales threshold.
As a non-resident business, some countries may require you to appoint a local tax representative in support of your quest for a VAT number. This is probably a wise idea regardless, to help navigate the specific laws of the land and overcome any potential language barriers.
Note that in some countries, you won’t be able to file your own VAT returns either. Again, this may need to be done via an agent.
We’ll take a closer look at reporting your sales and filing your returns in a future blog. In the meantime, for more useful information on e-commerce tax issues - and a look at those Amazon fulfilment options - don’t forget to download our e-commerce ebook.
In the meantime, if you’d like to find out more information about e-commerce services or obtain a no obligation quote for our accountancy services, please contact Sian on 0121 667 3882 or email firstname.lastname@example.org.
Read more of Inform's tax blogs: