Modern e-commerce customers expect short delivery times and predictable, standardised delivery terms. For that reason, many e-commerce sellers rely on third-party logistics (3PL) partners to manage fulfilment. 3PL generally includes warehousing, packaging and shipping.
As an integrated logistics solution, 3PL providers clear benefits to e-commerce retailers. In particular, 3PL is an effective way to efficiently ship goods to multiple markets. However, sellers need to pay careful attention to the VAT implications. The multiservice, multinational nature of 3PL can make VAT compliance fairly complex.
Where do 3PL and VAT meet?
Broadly speaking, fulfilling e-commerce supplies in the EU via a 3PL provider raises three potential VAT compliance issues. First, you may need to import your goods into the EU. That raises the spectre of import VAT and customs duties.
Second, warehousing your goods at fulfilment centres, potentially in multiple countries, generally entails an obligation to register for VAT.
And finally, of course, there is the matter of accounting for VAT on the actual sale of goods.
Let’s consider these in turn.
Import VAT and customs
If your goods do not originate in the EU, you will of course first need to import them. In such cases, the goods will be subject to import VAT and customs duties.
Sellers that use a 3PL service should bear in mind that, for a number of regulatory and logistical reasons, goods will often be imported into the EU via a different country from where the fulfilment centre is located. Therefore, you may have distinct obligations to register for VAT in more than one location.
3PL services will often involve storing your goods in fulfilment centres. It’s an effective way to quickly deliver your goods to customers throughout Europe.
However, in terms of EU regulations, when you move your goods in a 3PL warehouse, you generally will be required to register for VAT in the country in which your goods are stored. If the service involves warehouses in multiple countries, you may be required to register and file for VAT in each country.
VAT on e-commerce sales
If you’re selling to customers across Europe, you will need to take account of distance selling thresholds. Exceeding the threshold in any country will require you to register for local VAT.
Alternatively, from 1 July 2021, e-commerce sellers will also be able to take advantage of the new One Stop Shop (OSS) to account for VAT on e-commerce sales fulfilled from Europe.
In either case, you will be required to register for VAT in one or more countries. (The OSS simplifies the process, allowing you to account for your VAT with a single quarterly VAT submission.) You will also have to appropriately charge and account for VAT on sales.
VAT is a supply chain issue
E-commerce sellers use 3PL providers to ensure more efficient supply chain management. As we can see, complex supply chains means complex VAT requirements. Don’t let VAT be the weak link in your supply chain.
Get in touch with a Vatglobal e-commerce VAT expert for specialist guidance on how to optimise your 3PL VAT compliance. We’ll ensure you’re always 100% VAT compliant, everywhere you have an obligation. It’s the most efficient and cost-effective way to optimise your VAT compliance.