EU Distance Selling VAT Thresholds
Meridian Global Services are an International VAT company with over 25 years experience, working with large medium and small businesses all over the world, helping them to manage their VAT & Sales Tax obligations and proceed with confidence in their international expansion. With sellers being encouraged to increase their cross border sales by both eBay and Amazon it’s essential to ensure you’re on top of your VAT obligations, not just within the UK, but with each EU country you trade with.
Meridian have shared some guidelines which you should be aware of if your overseas sales are significant:
If you are selling to consumers in another country, you should be keeping an eye on what VAT (or Sales Tax) rate you should be charging them. If you are based in the EU and selling to consumers in other countries in the EU you will need to keep an eye on the “Distance Selling Thresholds” for each country.
E.g.: You are based in the UK and selling to consumers in Germany, Ireland and France.
In this calendar year you have sold goods in excess of the distance selling threshold for Germany and France.
|Your Sales So Far This Year|
|Ireland||€15,000||Distance selling threshold is €35,000 in Ireland|
|Germany||€145,000||Distance selling threshold is €100,000 in Germany|
|France||€170,000||Distance selling threshold is €100,000 in France|
You have to register for VAT in Germany and France now and you will have to start charging the German rate of VAT to German customers going forward and charging French VAT to French customers going forward. If your sales into Ireland exceed the €35,000 threshold before the end of the year you will have to do the same in Ireland.
This is just one example based on the understanding that you are shipping your goods from the UK to consumers in Ireland, Germany and France. There are a whole myriad of other combinations that could exist where you could be using FBA (Fulfilment by Amazon) for example and you already have product in the Amazon centre in Germany, this could actually mean you should have registered in Germany as soon as you moved the product into Germany. Each of you will have a different set of circumstances so it is best to consult an expert to verify whether or not you have any obligations to register for VAT or Sales Tax outside of your own country and let them look after it for you.
Meridian have a couple of useful downloads you may want to read – “Distance Selling – The International VAT issues arising” and to check VAT thresholds across the EU, the Distance Selling Threshold Chart.
It is important to remember that VAT (or Sales Tax in the US) obligations do not have to be a barrier to selling internationally, but something you should be aware of and take the right action on at the right time. Once you are set up in these countries and in compliance you can sell away with confidence.
NB. If you are selling electronically supplied services (e.g. apps, streaming, downloads etc.) then you will have a whole new set of rules to comply with from Jan 1st 2015. Meridian have further information on the 2015 changes available on their website.
The key point here is contained in the very last paragraph, in relation to the new 2015 EU VAT charges for eServices. Those eMerchants providing eServices must now deal with a whole new set of rules, ones that do not entail any distance-selling thresholds. All eMerchants, no matter their volume of trade, must comply with these new rules. A game-changer for many SMEs in this sector.