Tips for selling in the EU: Fulfilment Centres & VAT
When selling goods to the EU, VAT compliance is a non-negotiable element that must be considered by both EU and non-EU based businesses.
Since 1 July 2021, new VAT rules for online business to consumer (B2C) sales of goods and services came into force throughout the European Union, reflecting the increase in digital and cross-border commerce taking place online and often on large marketplaces. The new principal rule is that VAT must now be paid where the customer is located.
With these changes, marketplaces were given additional VAT responsibilities, requiring them in certain scenarios to charge and report VAT on behalf of the seller. The scenarios are as follows:
- Distance sales of goods imported into the EU with a value up to EUR 150
- Supply of goods to EU consumers when the goods are already located within the EU and the seller is based outside of the EU, irrespective of the value of the goods
If your business falls into either of these categories, the marketplace will become the ‘deemed supplier’ and will need to charge and collect VAT from your EU customers.
It is also essential to remember that, in any scenario, if you are moving stock between EU member states where your business is not established, you will need to register locally for VAT. This may be the case if you intend on holding goods within an EU fulfilment centre for onward sale to consumers.
Sending stock to an EU fulfilment centre
For non-EU businesses (this includes the UK) that intend on moving goods for storage in an EU fulfilment service, perhaps to be closer to potential customers, standard importation procedures must be followed.
In order to ship goods to the EU, you will need to complete a customs declaration for each consignment you send. You will also be responsible for covering any customs duties/import VAT, but you will be able to claim this import VAT back via your foreign VAT return to the destination where your stock is held.
Holding stock in an EU fulfilment centre
Once your stock has arrived at the EU fulfilment centre of your choosing, you will now be able to distance sell this stock to EU customers.
An important distinction to make here however is that, for example, if you hold stock in a fulfilment centre in Germany, any sales you made to German customers can be accounted for via your German VAT registration. However, if you want to sell goods to EU customers in another country you won’t be able to account for the VAT due on these sales via your local German VAT registration. For these intra-EU sales, the seller will either need to register in each country where your customers are based or register for the Union One Stop Shop in Germany as this is where their stock is held. Through the Union OSS, this seller can collect and report all cross-border supplies shipped to EU consumers.
If, however, you hold stock in EU fulfilment centres as a non-EU established business and sell through a marketplace, the marketplace itself will be responsible to collect the VAT due on all sales between EU member states when your goods are in the EU at the point of sale.
Differences between selling via a marketplace and your own website
It’s important to distinguish between selling through a marketplace and your own website, as these are treated differently from a VAT perspective.
If you are a non-EU business who holds stock within an EU fulfilment centre for sale via your own website, you will still need a local VAT registration in the location where your goods are stored. As well as this, you will be required to have a Union OSS registration to account for all intra-EU cross-border sales made through your online website.
If you are a non-EU business selling on their own website who holds stock in a fulfilment centre outside of Europe for sale to EU customers, your VAT obligation will directly relate to the value of your consignments. If your consignments do not exceed the EUR 150 limit, VAT will be due where your customer is based, and you will be eligible to report this via the IOSS (Import One Stop Shop) Scheme. However, if the value of your consignments exceeds this threshold, normal customs procedures will apply, and import VAT will need to be paid upon importation by the Importer of Record.
For those selling through a marketplace, as mentioned above, sellers making distance sales of imported goods to EU customers, with a consignment value not exceeding EUR 150, the marketplace will take VAT responsibility. This also applies to non-EU businesses holding stock in EU fulfilment centres for onward sale to EU customers, regardless of value or destination.
For EU businesses the marketplace will not take responsibility for charging and collecting VAT on your behalf on your intra-EU online sales, this will need to be done by you at point of sale.
VAT Registering in the EU
To reiterate, you will likely need to VAT register in the destination where your stock is moved to. If your business is using the Union OSS to account for intra-EU B2C sales, you will need to determine which country you would like to register in. For most businesses this will typically be in an EU country where you dispatch your intra-EU online sales from. For businesses established within the EU, you will need to register in your country of establishment.
When deciding where to register for VAT in the EU, it’s important to remember that VAT rates differ from country to country in the European Union. For example, if you have customers in Germany, France and Spain, you will need to apply 19% VAT for Germany, 20% for France and 21% in Spain. How you set your pricing will need to reflect these specific rates to protect your profit margins when selling throughout the EU.
VAT Compliance Checklist
- Review your supply chain to identify your VAT obligations and potential liabilities
- Register for VAT when moving stock between EU countries in which you aren’t established
- Ensure you are up to date with VAT rates based on where your customers are located
- Consider whether OSS or IOSS may benefit your business and streamline your processes
- Plan if you need to de-register in an EU Member State and re-register elsewhere
- Check marketplaces’ VAT responsibilities in accordance with your goods
If you need help with your EU VAT registration, SimplyVAT.com will be able to assist your business sell cross-border compliantly. For any questions about your potential liabilities when trading in the EU, speak to a member of their team and they can walk you through your business’ requirements and help you get set up!