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When do e-commerce sellers need a VAT registration?

Why should an e-commerce seller register for VAT? Let’s break that question down into two parts: when does the law require VAT registration? And when does it make good business sense for e-commerce sellers to register for VAT.

When e-commerce sellers are required to register for VAT

The first question is straightforward enough. There are a number of circumstances under which a distance seller will be required to register for VAT in one or more of the countries to which they sell goods.

For example, if an e-commerce seller imports ‘low value’ goods  into the UK (currently, consignments valued under £135), then they are legally obliged to register.

Similarly, if an overseas merchant sells goods that are located in the UK at the point of sale, they must register for VAT.

E-commerce sellers also need to be aware of any distance selling thresholds. For instance, if you sell goods directly to customers in the EU, you will need to register for local VAT if you exceed the specified threshold. (Note also that a specific distance selling threshold applies to sales to customers located in Northern Ireland.)

These criteria are non-negotiable and failure to register can result in fines or other penalties. 

Sellers need to also be aware of VAT obligations if they warehouse their goods in other countries or take advantage of supply chain services such as Amazon FBA. These will invariably raise VAT compliance issues. In many cases, you will be required to register for VAT once your goods are warehoused.

Advantages of VAT registration for e-commerce sellers

Let’s consider a scenario. An overseas seller sells goods to customers in the UK via an online marketplace (OMP) such as Amazon. According to current UK regulations, the OMP itself will be responsible for charging and accounting for VAT on the sale of those goods. 

However, the seller will still be responsible for duties and import VAT on the goods. Registering for UK VAT will thus have a clear advantage in that it will enable you to reclaim that duties and import VAT. 

Moreover, UK VAT registration will enable you to take advantage of mechanisms such as postponed VAT accounting. This enables you to account for import VAT on your VAT return, providing a significant cash flow advantage. 

VAT compliance, and beyond

For e-commerce sellers, managing your VAT obligations in multiple markets can be complex and frustrating. Vatglobal’s expert team and powerful VAT compliance technology makes e-commerce VAT registration easy. 

But that’s only one part of our service. We also provide expert strategic guidance on how to optimise your VAT compliance. We’ll ensure you always reclaim your VAT and optimise your cash flow.

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