Online selling is international by its very nature, and this may sometimes lead to confusion in sellers who aren’t able to clear up their doubts not even turning to their accountants for advice. Let’s say it clearly, sellers and accountants speak different languages.
Since this is a guide for sellers, we will strictly avoid bureaucratic jargon and we will use practical examples.
In case you still haven’t read it, the first part of this guide explains how to avoid taxation errors on Amazon sales.
In addition, as of July 1, 2021, a major VAT reform in Europe came into effect, introducing important changes especially for those who operate online and sell their products abroad. We recommend you read the updated article to better understand who can take advantage of the new “One Stop Shop” (OSS) regime to sell across Europe more easily.
1. VAT distance sales thresholds (in effect until 01/07/2021)
A customer has bought one of my products from France, which VAT rate must I apply?
Before responding to this question, let’s take a look at some important concepts.
1.1 What are VAT distance sales thresholds and how do they work
The VAT distance sales thresholds are the limits to the annual revenues imposed by each European country, that, when exceeded, oblige the seller to open a VAT position and pay taxes in that country. It is important to note that only the revenues deriving from sales towards individual customers are counted.
In case the thresholds were exceeded during the preceding year, the same criteria must be applied for the current year.
1.2 What happens when the thresholds are exceeded
Looking back to the first question, the answer is not unique.
As long as your revenue remains below the French distance sales threshold, you will apply the Italian Vat whenever a French customer buys one of your products.
Instead, starting on the day your overall sales towards French customers exceed the threshold, you will have to apply the French VAT rate and file a tax return as well as pay VAT in France.
1.3 What are the values of VAT sales protection thresholds
Let’s see the limits in the various European states in the table below:
|Member State||VAT thresholds for sales to EU countries|
|National currency||Equivalent in euros*|
|Austria||35 000 EUR|
|Belgium||35 000 EUR|
|Bulgaria||70 000 BGN||35 791 EUR|
|Cyprus||35 000 EUR|
|Czech Republic||1 140 000 CZK||44 873 EUR|
|Germany||100 000 EUR|
|Denmark||280 000 DKK||37 595 EUR|
|Estonia||35 000 EUR|
|Greece||35 000 EUR|
|Spain||35 000 EUR|
|Finland||35 000 EUR|
|France||35 000 EUR|
|Croatia||270 000 HRK||36 291 EUR|
|Hungary||35 000 EUR|
|Ireland||35 000 EUR|
|Italy||35 000 EUR|
|Lithuania||35 000 EUR|
|Luxembourg||100 000 EUR|
|Latvia||35 000 EUR|
|Malta||35 000 EUR|
|Netherlands||100 000 EUR|
|Poland||160 000 PLN||37 859 EUR|
|Portugal||35 000 EUR|
|Romania||118 000 RON||25 305 EUR|
|Sweden||320 000 SEK||31 390 EUR|
|Slovakia||35 000 EUR|
|Slovenia||35 000 EUR|
|United Kingdom||70 000 GBP||80 197 EUR|
(Table updated to April 2018)
Click on the following link to see threshold updates:
2. Tax at consumer’s country option
Let’s analyze a particular case, which is very important, however, because it often occurs to Amazon sellers that use the pan-European program to store their goods abroad.
It is also possibile for a seller that has not yet exceeded the distance sales thresholds to opt for VAT at consumer’s country. This option can be chosen in the VO panel of the VAT declaration.
If your company is based in a country with high VAT rates in Europe, it could seem quite convenient to apply the VAT of consumer’s country which would be lower. But, considering the obligation to open VAT registrations and the extra costs associated with filing VAT returns abroad, it’s not really worth the trouble.
On the other hand, an Amazon FBA seller that activates the pan-European program and already has a VAT registration abroad necessary in order to store his goods, may find it convenient, at that point, to opt for tax at country of arrival, even without having exceeded the VAT distance sales thresholds.
2.1 Amazon VAT calculation service
The moment you decide to activate Amazon’s VAT calculation service you must keep in mind that:
Both the VAT calculating service as well as the VAT services on Amazon assume the seller has opted for VAT at country of arrival of goods, provided that the seller has inserted a valid VAT number in his Seller Central account. This implies that a cross-border sale of goods to intra-EU customers (distance sales) will always be taxed at the country of arrival of the shipment if a valid VAT number is available for that country.
The general rules regarding VAT applied to distance sales establish that they be taxed in the European country of shipping, on condition that the seller has not reached the distance sales threshold set for that particular country of the European Union. However, it is possible to opt for immediate taxation on the distance sales in the country of arrival. Thus, if a seller has not yet exceeded the distance sales threshold in one or more of the countries in which he has a VAT registration, he must be sure to have duly informed the competent tax authorities that he has chosen immediate taxation on his distance sales at the EU country of arrival, before registering for the VAT calculating services.
3. Local VAT jurisdiction on distance sales
When selling on Amazon, it is possible that your products be sold to foreign customers, even if you only sell on the Italian platform. For this reason it is important to know how the local European VAT jurisdictions work.
3.1 In country of departure of shipment
Sales to private customers are locally relevant in the European country where the product is situated at the time of purchase (that is to say, where the warehouse from which the shipment departs is situated), if the seller has not exceeded the distance sales threshold of the buyer’s country.
3.2 In country of arrival of the shipment
The sales will be subject to VAT jurisdiction of the European country of the private buyer if the seller has opted for tax at country of destination, or in case he has exceeded the distance sales threshold in that country.
4. VAT Rate
Once the country of jurisdiction has been established, we can proceed to determine the VAT rate to be applied to the transaction.
First let’s see when VAT is not applied:
4.1 Flat-tax rate scheme
For flat-tax rate scheme sellers all the transactions involving foreign customers, whether private or business, will be considered as internal operations, and therefore VAT will not be applied.
4.2 Extra-UE sales
Sales to customers outside the European Union are not subject to VAT.
4.3 Standard and reduced VAT rates
In all the other cases the VAT rate of the country of jurisdiction will apply. The VAT rate applied may be either standard or reduced depending on the type of product.
For example, the standard rate in Italy is 22%, but there is a reduced rate of 10% on food products and a 4% reduced rate on basic necessity products.
At this point, you have all the info you need to define the local jurisdiction and the VAT rates for all your sales. To find out how to fill in your daily takings book continue reading part 3 of the guide.
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