eCommerce in the EU from a VAT perspective

Expanding your eCommerce to Europe and entering into the EU could be a great opportunity for online sellers. Your business will reach millions of additional new customers across the continent adding and diversifying your revenue streams.

e-Shoppers are now looking for products offered not only in their home country but from other countries within the EU and from outside the EU and overseas. This shows the importance and potential of cross-border online businesses who have experienced a steady growth during the last 5 years. Cross-border sellers from within the EU have increased their sales almost a 30% and non-EU and overseas sellers have almost double their figures ⁽¹⁾.

Nevertheless, great opportunities come with complex implications, being one of them the European VAT.

Entering into the EU market and VAT related requirements

Importing products into the EU

When you are importing goods into the EU, you should be able to identify yourself before Customs. For this purposes you should obtain an EORI number, however, if you are moving goods within the EU then you don’t need an EORI number.

Once the shipment arrives to the EU

Import VAT and Import duties must be paid immediately at the border. For this you need to be VAT registered in the country where goods arrive. Once the goods have been imported into the EU they are considered in “free circulation” and simplification measures apply for movements of goods between EU member states.
Besides, some EU countries allow you to extend or postpone the Import VAT by appointing a Fiscal Representative and then obtaining an Import VAT Deferment License. With the mentioned deferment license you don’t need to pay the import VAT to Customs but you only report it in the VAT return which is an important cash flow advantage.

Delivery of goods or services

The sale of goods and their physical transport qualify as a taxable supply for VAT performed from the EU country of import. The delivery of services is considered as taxable supply as well.
It is important to know the Distance Selling Thresholds applicable in each EU country. When exceeded, the company must register for VAT in the country of arrival of the goods.
After registration there will be periodical compliance obligations to follow that will impact in your company.

VAT implications when selling beyond local borders

Once you have decided to go beyond borders into the EU market, there is a good chance that you are obliged to register for VAT purposes in one or more countries. This comes with numerous requirements and obligations that you will need to comply with. Everchanging legislation, different applicable VAT rates, diverse types of reportings, dealing with tax authorities in foreign languages are tasks not to be taken lightly, especially if you would like to avoid unexpected penalties putting your business at risk.

We strongly recommend you to look for professional advisory which would save you time and money and will ensure your expanding business is fully VAT compliant.

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