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EU Marketplace VAT and how it will impact eBay sales
From the 1st of July, marketplaces in the EU will be obliged to collect VAT at the point of purchase and remit it to the local in-country revenue collectors. EU Marketplace VAT is great news if you only sell on marketplaces as it means you’ll no longer have to collect VAT on your marketplace sales, and indeed might not even have to register for VAT in the EU (or potentially only register in one country if you have other reporting obligations, e.g. if you hold stock in the EU).
We wanted to know exactly how this will impact your sales to the EU and what you should expect, and eBay have been kind enough to tell us how EU marketplace VAT will work on eBay.
The price you specify
“If I specify a price of £120 with a VAT rate of 20%, does eBay deduct the £20 UK VAT, pay me £100, and then charge the EU buyer £100 plus their domestic VAT rate?”
For 1 July, eBay will build a logic which imputes the VAT from the sellers gross price, and then computes the destination country VAT. This ensures that the seller will always achieve the revenue they are aiming for.
So in the example:
Seller listing with GBP120, showing 20% VAT.
120/120×100 = 100 net, 20 VAT.
eBay calculates destination country VAT on the net amount, and collects 100+VAT from the buyer. Seller revenue remains 100, and eBay remits destination country VAT at the appropriate rate to the tax authorities.
EU Marketplace VAT and special UK VAT Schemes
What happens to a seller on a special UK VAT scheme, such as:
• Flat rate (typically invoice VAT rate specified as 20% but only pay 7.5% to VAT man) – what rate should they specify? and
• Margin scheme (not allowed to specify VAT on invoice but will pay VAT on the profit only) – again, what rate should they specify?
In both of these cases, eBay cannot apply these schemes. eBay needs to collect VAT at the appropriate rate for the country of delivery on the full value charged to the buyer. In these instances, sellers should indicate the net amount of revenue they wish to achieve for their item, and list with a 0% VAT rate. eBay will then collect delivery country VAT on the full value. The net amount will be remitted to the seller, and the VAT amount will be remitted to the responsible tax authorities.
EU marketplace VAT and selling on eBay
In the past, if you were a VAT registered seller and sold a product to say the US or Australia, if you listed a product at £120 including VAT then you would collect £120 but there would be no VAT due to HMRC. Sell the same product in the UK and £20 belonged to HMRC. There has never been a mechanism on eBay for deducting VAT on sales to countries where it wasn’t due and so some sellers used it as additional profit whilst others offered service such as free international shipping funded from what were effectively bonus funds.
When selling to the EU, sellers simply remitted the funds on their domestic VAT return unless they hit certain thresholds in which case they had to register in local EU countries.
Now, from the 1st of July with EU marketplace VAT eBay will deduct the local UK VAT unless you specify a VAT rate of zero. It’s fair for the buyer as eBay will collect VAT at the local rate applicable to the EU country they reside in, but for you as the seller if you were expecting £120 don’t be surprised if your net remittance is £100.
You may wish to consult your tax advisor on the advisability of specifying a zero VAT rate on all your products – you will of course continue to collect and remit VAT at the appropriate rate in the UK but you’ll make a bit of extra margin on UK sales. If that’s the course you choose, you can of course opt to offer free shipping or other benefits to make your products more attractive to EU buyers.
as a VAT registered seller shipping to the EU, we refund the customer any VAT if they buy from us on ebay and then they pay import duties via UPS when the system arrives in their country, if ebay are taking the VAT from the sale, we would not be able to refund the customer the VAT and then the customer would need to pay VAT again when the system arrives in their country, surely this should not be the case??
What will happen for private sellers and sellers who are not registered for VAT?
I’m assuming that it will work something like this. The buyer gets some form of proof (from the marketplace) that the VAT has or will be collected and paid. This gives UPS etc a ‘get out’ so they don’t have to collect the VAT element of the purchase price. I think the problem with the above is that it is an extract of a much bigger scheme that is largely missed out here. I think you’ll have to read up on the scheme in full or get advice from your tax adviser.
‘eBay will build a logic ‘
I’m off to the bookies to bet my house and my life savings that this will go horrendously wrong when launched.
I only sell in the UK market now, I have knocked the EU selling on the head. Does this move affect UK sales or not? eg Currently I sell an item at £20 including VAT, Ebay deduct their fees and send me the balance and I declare £20 on my VAT return.
Are Ebay going to deduct the VAT from the balance they send me?
We are a non VAT registered business selling under 10K a year to the EU.
Do we still have to lose 20% per sales or whatever the cVAT rate is for the EU country at the time and we won’t be able to offset this as not VAT registered?