How can e-commerce businesses adapt when international VAT compliance rules change? It depends, in part, on how much assistance you get from the local tax and customs offices.
Consider the case of Finland. Following a recent change to EU regulations, low-value imports are no longer exempt from VAT. That was a big deal for many e-commerce retailers, as previously you could ship items valued under €22 to EU countries and not pay any import VAT.
In response, Finnish authorities made a concerted effort to produce detailed, updated information which was made available to the public. They also reconfigured the import declaration process with public feedback in mind. And it’s a good thing that they took the trouble, as calls to the Finnish Customs Information Service tripled in the months after the VAT rules were changed.
E-commerce VAT is global by definition
The Finnish example is very encouraging. VAT regulations are complex. Plus, regulators are constantly looking to update VAT rules to meet the demands of the digital economy. So clear, concise guidance is always welcome.
But there’s more to e-commerce than shipping goods to Finland. Are online sellers expected to call the helpline in every country where their customers happen to live?
Fortunately, because Finland is part of the EU, the import VAT rules are uniform for all member states. That’s very useful, because you don’t need to learn about different regulations for every EU country.
But there are local variations. For example, the rules governing import VAT on high value goods shipped to France or the Netherlands may be different from the rules for import VAT when shipping to Poland.
What’s the French for administration?
Then there’s the question of bureaucracy. For example, say you ship goods to warehouses located in EU countries. They could be your own warehouses. Perhaps you rely on Amazon FBA. Either way, there’s a good chance you are obliged to register for VAT. Or you may choose to become VAT registered to take advantage of import VAT deferments. You may have worked diligently to master the final amendment to EU Directive 2006/112/EC or whatever, but who is going to accurately complete your regular VAT returns in Spanish or German or Estonian? And if there are errors, how are you going to negotiate with the local tax offices?
After all, e-commerce should be about driving your online platform. Embracing new markets. Discovering customers hungry for your goods in the most unlikely corners of the globe. Creating new demand.
But if every new market creates a new set of VAT headaches, you may quite reasonably decide the trouble outweighs the benefit.
Less is more: A single point of contact for compliance
In other words, e-commerce VAT compliance is all a question of scale. Sure, Finnish customs may be polite, friendly and helpful. But if you want to drive business globally, you ideally want a single point of contact that manages all your global VAT compliance needs. And you want access to an ace team of global VAT experts who can anticipate VAT issues anywhere in the world and troubleshoot them as they occur.