Ordinarily, when goods are sold to VAT registered business customers in other EU countries, these goods are zero rated for VAT in the supplier’s country, as long as the goods are dispatched from the country of supply and the customer accounts for the VAT due on the goods as acquisition tax, calculated at the relevant rate in the country of receipt.
Distance selling is the term used to describe when goods are sold from a supplier in one EU member state to a customer in another member state who is not registered for VAT. Non-VAT registered customers are commonly known as ‘non-taxable persons’ and might include private individuals, small businesses, or charities and public bodies. Sales affected will include mail order, tele-sales or goods ordered from online websites.
Sales to these customers will be subject to VAT at the rate applicable in the supplier’s country, until the distance selling threshold is breached in the country of destination.
Each EU member state sets an annual distance selling threshold, which can be either €35,000 or €100,000 per calendar year. For countries that don’t use the Euro, the equivalent values in the local currency applies e.g. the UK distance selling threshold is £70,000, which equates to €100,000.
VAT registered businesses are required to keep a record of all sales made over a calendar year to non-taxable persons in each EU member state, to ensure that they remain aware of when they might breach the distance selling threshold. Once the threshold is breached in an EU state, the supplier is required to register and account for VAT to the local tax authorities on all future sales of goods in that country. In addition, businesses can also voluntarily register and account for VAT in another EU member state if the wish to, prior to exceeding the distance selling threshold.
An exception to the threshold rule, however, is where a supplier sells goods which are subject to Excise duty; these goods are not subject to the threshold and suppliers of such goods are required to register for VAT as soon as they make any supplies to other EU states.
The Distance selling rules described apply where goods sold to customers in other member states are dispatched from the supplier’s country. However, in some instances suppliers may also wish to hold stocks of their goods in other member states, for speed and ease of shipment. As soon as a stock of goods are held by a supplier in a member state other than its own, this triggers a liability for the supplier to register for VAT in the member state where goods are held.
Many businesses that sell goods via Amazon have supplies of their stock held in fulfilment warehouses in other member states at Amazon’s request, to make it easier to ship goods to the end customers when orders are placed. Amazon are obliged to inform sellers that the placement of their stock in other EU warehouses triggers a requirement to register for VAT, but many small business find the process of obtaining EU VAT registrations daunting and difficult.
HLB International can assist businesses to acquire EU VAT registrations in respect of Amazon sales via our amavat service, which is specifically aimed at assisting Amazon traders to be VAT compliant across the EU. Please contact your local HLB VAT contact for further details.