Some pointers are more important than others. But the pointers below are things that every eCommerce seller should know about European VAT. The points below will help you to save European VAT refunds and contribute them to your bottom line as well as mitigate any penalties and non-compliance risks.
European VAT is Reclaimable for Businesses Based Overseas
Cross-border VAT is reclaimable from all member states. So if your business incurs any expenses or import VAT in any member state, you are entitled to claim it back. You can claim it back via two refund mechanisms – the 8th Directive (for EU-to-EU claims) and the 13th Directive (for non-EU to EU). However, the process is complex and requires a deep knowledge of each country’s rules and documentation requirements. Therefore, we recommend outsourcing the procedure to specialists such as our sister company, VAT IT who are world-leaders in this field.
MOSS: European VAT Registration Need Only be done once
Currently, you’ll have to register for VAT in each member state depending on where you are making sales. However, come July 2021, you’ll be able to take advantage of the EU’s MOSS (Mini One Stop Shop) scheme. This allows you to only have to register once for all EU member states (source). EU established businesses use the ‘Union’ scheme and non-EU businesses use the ‘non-union’ scheme. Since January 2019, a threshold of €10,000 (or local currency equivalent) has been in place, meaning that businesses need only register for MOSS once EU sales exceed this level.
Europe’s Clamp Down on e-Commerce VAT Fraud
There’s no getting around reporting on your taxable supplies. Failure to pay VAT liabilities is a contravention of EU law and can result in harsh punitive action and in severe cases, black-listing. The EU VAT authorities monitor VAT fraud to such an extent, that even your online platform may restrict you from selling or worse, close your shop if you are not VAT registered.
Using a Fulfilment Centre Creates an Immediate VAT obligation
You will need to charge VAT in every country or state where you use an Amazon fulfilment centre. To expand, using their fulfilment centres creates an immediate legal obligation for Amazon VAT registration and compliance. For more VAT advice specific to Amazon sellers read our guide to VAT for Amazon sellers.
Every Member State has its own filing requirements and you’ll need to know them all
Once registered, you will be obliged to charge the relevant VAT on all your eCommerce sales. Furthermore, you’ll need to pay the VAT you charge over to the tax authorities and comply with each local legislation. If you’re selling to multiple countries, filing regular, compliant VAT returns can get tedious and complicated.
Tapping into the European market could be the greatest thing you ever do for your business. However, failing to note these European VAT related points that every eCommerce seller should know would be a grave mistake. You should always ensure that your business’s European VAT status is compliant and transparent. Doing this will help you avoid penalties and pitfalls further down the line. Vatglobal is a European tax registration & compliance specialist. We’re able to help your company navigate the very complex world of European VAT so that you can get on with growing your business.