Black Friday and Cyber Monday sales are boom times for e-commerce retailers. If you sell goods to customers online, Black Friday means three things: sales, sales, sales.
But sales means VAT, and VAT means compliance. A Black Friday sales spike is great for business, but it could have serious and complex implications in terms of your VAT compliance obligations.
That’s a good thing. It means you have a product people want and you know how to leverage a promotion. But you are going to need to pay attention to the regulations to ensure your business remains VAT compliant in all relevant jurisdictions. Here’s what you need to know.
Black Friday in a dark year
It’s important to bear in mind that this year’s Black Friday and Cyber Monday promotions take place in a broader context of shifting consumer behaviour, with more activity taking place online.
As you’ve no doubt heard a billion times this year, in 2020, remote working, shopping and socialising is ‘the new normal’.
With more people from all walks of life doing their shopping online, many e-commerce retailers are increasing sales in existing markets or even reaching new markets.
More sales to more people in more places means higher risk of VAT non-compliance
You might have a strong international community of customers and that’s great. However, when you’re making sales in a country and you reach a certain threshold, the tax authority in that country will expect you to register and account for that output VAT.
If your annual sales have skirted close to, but below, the threshold in each of the markets you sell your products to, the combination of Black Friday spike and a general increased demand for online shopping might well push you over the limit. And for every market in which you exceed that threshold, you need to register and account for VAT in that country.
The rules of e-commerce distance selling
The regulations for distance selling and VAT compliance are very clear. If you export goods from your local jurisdiction into other EU countries, you are required to register in each of those countries once you exceed their country-specific sales threshold. And, If you cross that threshold in multiple countries, you need to register for VAT in each of them.
This can be a complex and time-consuming process, with different rules and processes in each jurisdiction.
Fortunately, the latest automated VAT tools make compliance a breeze. Especially when you have real human experts (i.e Vatglobal) on hand to make sure you catch the Black Friday boom, with none of the Black Friday [vat penalty] blues.