Online trading is an expanding marketplace, and one in which FS Online is experienced and able. Throughout the European Union (EU), there are thresholds restricting the amount of distance sales that can be made before local VAT registration becomes a legal obligation. Using a fiscal representative can avoid an online trader having to set up offices in each member state in which the thresholds are exceeded. In many states local law requires the appointment of a fiscal representative anyway.
What Do We Mean By Distance Sales?
These are sales of goods made to individuals, or other non-business buyers who reside in a different EU state to that of the vendor. Such sales will normally arise via the Internet or mail order.
When Do My Problems Start?
If you make distance sales of taxable goods to individuals in EU member states, and the annual value of those sales breaches these thresholds, you will have to register for VAT in the EU State concerned:
Austria € 100,000
Belgium € 35,000
Bulgaria BGN 70,000
Cyprus € 35,000
Czech Republic € 35,000
Denmark DKR 280,000
Estonia € 35,000
Finland € 35,000
France € 100,000
Germany € 100,000
Greece € 35,000
Hungary € 35,000
Ireland € 35,000
Italy € 35,000
Latvia € 35,000
Lithuania LTL 125,000
Luxembourg € 100,000
Malta € 35,000
Netherlands € 100,000
Poland € 35,000
Portugal € 35,000
Romania € 35,000
Slovakia SKK 1.5 million
Slovenia € 35,000
Spain € 35,000
Sweden SK 320,000
UK £ 70,000
What Do I Do If My Trade Is Below These Thresholds?
One of the vital considerations for VAT when entering into e-commerce or other distance sales is where the place of supply of those sales is deemed to be. Up to the thresholds stated above, the place of supply is deemed to be in the state or country in which you, the seller, supply your goods from. If this is in an EU member state, or a non-EU country with a VAT regime, your domestic rate of VAT should be charged on the sales. Once the thresholds are broken, the sales will be deemed to be made in each state where the thresholds have been exceeded - you will have to register for VAT in each of these states, and charge the rate of VAT in force in each of them.
What About Sales To The Trade?
Where distance or e-commerce sales are being made to businesses that are registered for VAT within the EU, if their EU VAT number can be quoted on your invoice, you need not charge VAT. If you are established within the EU, the invoice will be zero rated as a despatch to a taxable person in another member state. Your customer will then account for VAT under a reverse charge mechanism. If you are established outside the EU, your customer will pay and recover import VAT as appropriate.
How About Electronic Media?
If you make supplies that do not require physical delivery, for example the download of software through a website, the same rules apply; if you know that your customer is a VAT-registered business, and you can quote their EU VAT number on the invoice, VAT is not chargeable. If they cannot supply a VAT number, or if you are supplying to an individual, the VAT liability of the supply is subject to the value of such supplies you make in that member state.
If you are a non-EU supplier you will need to register through a specially created portal to pay EU VAT on your supplies to non business customers.
