European Ecommerce and VAT: The Essential Guide

European Ecommerce and VAT

This post is by Claire Taylor, CEO of – a company which helps ecommerce businesses trade across borders in compliance with complex European VAT legislation.

If you sell online you need to understand which international tax laws will be relevant to your business. Just because your business is online, doesn’t mean it isn’t governed by the normal rules of taxation.

And if you sell to buyers in European countries, even if your business is based in another part of the world, you need to know about VAT.

So what do ecommerce businesses need to think about? What exactly are the different rules and regulations? What do you need to do to ensure you are compliant? And what happens if you don’t comply?

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The rules

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There are some fundamental questions which need to be asked:

  • Where are you based? Inside or outside the EU?
  • Where are your customers? Inside or outside the EU?
  • What are you selling? Goods or services?
  • Who are you selling to? Businesses or consumers?

This post is going to focus on B2C sales – the online retailer selling either goods or services directly to private consumers.

Non-EU businesses selling goods into Europe

Who is the importer of record?

For businesses outside the EU selling into Europe, the responsibility for taxes and duties depends on who is the “importer of record”.

It is usually the consumer who will be asked to pay the import charges and VAT, via the parcel carrier, before the goods will be delivered. This is often not a pleasant customer experience, especially if it is unexpected. The additional import costs may even negate the benefits of buying abroad, and can result in a high number of returns from disgruntled customers.

To avoid this, you may want to consider registering for VAT in the first port of entry into the EU for your goods, for example, in the UK. By keeping ownership of the goods, you will be the importer of record, and VAT will be charged on the cost price of the goods on entry. The import VAT you pay is reclaimable on your VAT return, and the customer pays the full price at checkout – including VAT – so no nasty surprises for them. You will also benefit from a reduction in the number of returns.

Where is your stock held?

You may decide you want to house your stock in a fulfilment centre or warehouse in an EU member state, in order to fulfil your European orders more cheaply and efficiently. Be aware – as the stock is now held within the EU, and is still owned by you, this has created a “taxable supply” and raises the immediate need for a VAT registration. There is no threshold to exceed. (See below for more about fulfilment centres).

If you decide to use a distributor or agent, the same VAT liability may not apply – it will depend on your contract with them and who has ownership of the goods. To find out check your contract and speak to an expert.

On a positive note, once you have registered here in the UK or another EU member state, you become governed by the VAT “distance selling” rules – the same rules which apply to EU businesses selling within the EU.

The distance selling rules

These rules stipulate that VAT registered businesses can supply goods to consumers in EU member states without having to register for VAT there, until they exceed the set thresholds. The thresholds vary, and in most EU member states are set at €35,000 (or equivalent). However for France, Germany, Luxembourg and The Netherlands, it is €100,000 (or equivalent), and in the UK it is £70,000 (or equivalent).

It doesn’t take much to breach the lower thresholds. To put it in perspective, if you sell medium or high-value goods, fifty luxury branded hand bags can easily carry you over.

EU-based businesses selling goods within Europe

If you are based in Europe, and sell to consumers within the EU, the distance selling rules also apply to you.

The rules apply even if:

  • You are not VAT-registered.
  • You are a sole trader.
  • You are only selling through marketplaces such as eBay and Amazon – the marketplaces do not take responsibility for VAT at all.

The rules only apply when you are selling to EU consumers.

For sales within the EU, if you have not exceeded the threshold for the buyer’s country, you should apply your domestic rate of VAT to those sales – if you are VAT registered. Otherwise no VAT should be applied.

Once you have exceeded the threshold for another EU member state, you will have to register for VAT there, charge the country’s own rate of VAT, and file returns according to the frequency and deadlines set by that country. You will stay registered as long as your distance sales exceed the threshold for the year. If your sales drop and you want to de-register, check the rules in that country – how soon you can de-register varies.

Selling to non-EU customers

If you are selling to consumers outside the EU, the supply of goods is usually zero-rated provided strict rules are followed, including providing evidence of the export within three months of the sale.

Penalties and fines

In 2011 the EU reported a loss of €193 billion from undeclared VAT. To stop the haemorrhaging, special measures have been put in place across the EU.

First, in 2012, member states set up a “mutual co-operation” initiative, with special units focused on ecommerce. The authorities in each country now communicate regularly and share data. The data-sharing and co-operation initiative may even be extended to non-EU countries, with interest shown from Norway, Russia, Canada, Turkey and China.

Online retailers selling abroad need to be very aware of their tax obligations in the countries where their customers are. Unfortunately ignorance is no defence. The “head in the sand” approach can work for a while, but it’s not a long term solution. Tax authorities have the power to levy penalties and interest charges, which can be as high as 120% on top of the unpaid taxes in some countries.

Fulfilment centres

If you opt to use a fulfilment centre in the EU, where you hold stock and retain ownership of it, you have an obligation to VAT register in that country. There is no threshold to exceed. If you are currently using a fulfilment centre in Germany, for example, without being VAT registered there, check your contract with the fulfilment centre and seek expert help if you are not sure if you should be registered there.

Compliance tips

Here are some tips to help keep you in compliance with the practicalities of VAT in Europe:

  • First, make sure you have the systems in place to capture accurate sales information including which countries your customers are in.
  • Make sure you include shipping/delivery costs as these are included in the final sums when calculating if a threshold has been exceeded
  • When charging your customers, make sure you add VAT to the shipping cost as well as the product price on your invoices.
  • Keep up-to-date with the VAT registration thresholds and where relevant, monitor currency fluctuations. Know when you are about to exceed a threshold including when the local currency is not in Euros.
  • Know which VAT rates apply to your goods or services. If you are in the EU, you may be familiar with the classification system in your own country, but it can vary elsewhere within Europe. Children’s clothing is a good example – it is zero-rated in the UK and Ireland, but attracts VAT everywhere else in the EU.
  • Once registered in another country, do not charge VAT for your own country as well as the buyer’s country. VAT should only be charged once.
  • It can take approximately 6 weeks to obtain a VAT registration, depending on the country that you are registering in.
  • Once registered you need to make sure your invoices comply with local regulations.


Pricing is a big issue. Unlike the USA, where it is customary to quote prices without Sales Tax, VAT should always be included in the price shown to consumers. So should you charge different prices in different EU countries or does one price fit all? How badly will your margins be affected by the different VAT rates if you don’t differentiate price in each EU location?

VAT rates vary across Europe from 17% – 27%. Can the margins you have set for your products absorb the variations? Will you stay competitive once you have VAT registered in another member state?

Is your ecommerce system set up for multi-currencies and multi-VAT rate application? If not, how easy is it to update?

It’s always a good idea to do some market research in your chosen markets and find out how you compare to local suppliers and how much flexibility this gives you. Planning ahead avoids a lot of future headaches and can even mean the success or failure of your business.


Intrastat Declarations are mandatory statistical returns which allow the tax authorities to monitor the movement of goods within the EU. Each country has its own reporting thresholds, which differ from the registration threshold.

A list of the thresholds (PDF) can be found in our booklet which you can download for free from Intrastat declarations will need to be submitted once thresholds are exceeded.

Selling services within the EU – rule changes from January 1st 2015

On January 1st this year, the European Commission changed the new VAT place-of-supply rules for EU suppliers of electronic, broadcasting and telecom services to consumers. These include digital downloads such as e-books, software, music and films. A full list can be found on HMRC’s website.

The fundamental change is that VAT on digital services is no longer accounted for where the supplier resides, but where the customer is. To reiterate: these rules only apply to the supply of electronic, broadcasting and telecom services to consumers – not to businesses – and not to the supply of goods or other types of services.

The new rules means that as the supplier, you will have to gather and report information on where your customers across all 28 EU member states. This puts a huge compliance burden on your business. Not only do businesses have to make sure the right processes, checkout software and accounting packages are in place, but they also need to take into consideration how the new rules will affect prices and margins.

There has been intense lobbying from the UK on these changes, and some progress has been made because of the negative impact on micro-businesses. As the UK has such a high local VAT registration threshold of £81,000, HMRC is allowing businesses below the UK threshold not to have to account for VAT in every EU member state, when they register for a scheme called Mini One Stop Shop (MOSS).


There was not the same success in lobbying for a minimum threshold to be set on e-service sales. A number of UK Members of the European Parliament made a request to the European Commission which was rejected by the EC on the 20th January 2015.

Is your customer a business or a consumer?

Usually a VAT registration number will determine whether your customer is a business or not. If they are not VAT registered other evidence, such as a link to their website or commercial documents, will suffice to show they are a business.

Where is your customer located?

Two pieces of evidence are required to show where your customer is located. This can include the billing address, the IP address of the device used to make the purchase, and the customer’s bank details.

Which VAT rate applies to your service?

The EC have published information relating to VAT rates (PDF) and specific country rules.

Are your invoices compliant?

Find out if you will need to raise an invoice and what information needs to be on that invoice – again different rules apply to different countries. Also consider whether your billing system can cope with the potential variations.

Where to submit the information?

The VAT can either be accounted for through local VAT registrations in each country where your customers, or via VAT MOSS (Mini One Stop Shop).

You can register for MOSS in one member state, and that tax authority will collect the information and payment from you and distribute it to the relevant tax authorities where your customer are. VAT MOSS has been introduced to make it easier for the seller, so they only have to deal with one EU tax authority.

Selling both physical goods and digital services

If you register for VAT MOSS and sell physical goods as well as digital services, those sales will still need to go through the distance selling VAT accounting process, whilst sales of digital services need to be accounted for via VAT MOSS.


A really effective solution to help online retailers has been produced by Taxamo. This solution recognises the location of the customer at checkout and applies the correct country VAT rate. It can collect up to six pieces of information for a single transaction, and prepare the data for the quarterly EU MOSS VAT return. It also stores the data for the mandatory 10 year period.

Non-EU businesses selling digital services to EU Consumers

Since 2003 non-EU sellers have already had to account for VAT based on the customer’s location, via the VoES (VAT on Electronic Services) scheme. This has now been incorporated into the new 2015 reforms. Non-EU companies can register with one of the 28 member states’ tax authorities, and submit all filings and payments to that tax office via VAT MOSS.

Non-EU providers have been repeatedly told that they would be automatically transferred from VoES to VAT MOSS. However, a number of tax authorities have indicated that this will now not happen, and these businesses will have to apply separately for a new registration with MOSS. Any EU country can be chosen unless you already have a permanent establishment in one county – if you do, this is where you need to be registered for MOSS.

The Cost of Compliance

Claire Taylor
Claire Taylor, CEO,

Preparation and planning are a vital part of the cross-border trade journey. Make sure you factor in the expense of complying with local taxes like VAT, including the cost of translation, software, and expert advice. It should sit alongside other regular expenses such as web hosting and accountants’ fees.

Circumstances unique to your business will dictate which VAT rules are relevant to you. Do your homework and your sums. Many businesses who have already made the leap to international expansion find the cost of compliance is far out-weighed by the increased sales and profits.

I wish you all the best with your international expansion plans!

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57 comments on “European Ecommerce and VAT: The Essential Guide

  1. Hello,

    What useful advice you have for the scenario where an US-based webstore is using an European dropshipping company to deliver goods to end customers?

    Would it be right to assume that the drop-shipper is the one to take care of VAT charges and everything else, or the US webstore is in some way responsible for VAT? If so, how? Thanks!

    1. Who has the VAT liability depends on who is invoicing the end customer.

      If the end customer is a private individual and the USA webstore sells direct to the private consumer, the drop-shipper does not have any of the liability.

      However who is liable between the USA website and private customer depends on who is the importer. If the customer is the importer, they are liable for all the import duties and VAT unless the goods sold are below the country’s low value consignment relief threshold. If this is the case, no VAT and duty is due.

      If the USA webstore becomes the importer through a VAT registration in an EU country, the USA webstore will account for the VAT in that country.

      The drop-shipper will only have VAT liability if he buys the goods from the USA webstore.

  2. A very informative article, thank you.

    If a micro business in the Cayman Islands (a British Overseas Territory) intends to
    ship their product( gourmet sea salt which is 0% duty) to a UK fulfilment centre ie: FBA, does the business still need to register for VAT? MOSS?

    1. Hi Monique

      The import of goods into the UK which are then sold to UK business or to private individuals represent a taxable activity and therefore the import will have to register for VAT in UK.

      However, if gourmet sea salt qualifies for zero rated VAT in the UK that applies to general food then you may not need to be registered for VAT, this is called “Exemption from Registration”. You will need to apply to HMRC for exemption from registration and, if granted, you will not be able to reclaim the input UK VAT you pay when you buy goods or services for your business.

      If your application for exemption from registration is not accepted by HMRC then you will be required to register for VAT in the UK.

      Import VAT is charged on goods imported from outside the EU at the same rate as if you bought the goods in the UK, therefore, if the goods qualify for zero rated VAT then the import VAT would also be zero rated i.e. no import vat is paid on zero rated goods.

      VAT MOSS (Mini One-Stop Shop) relates only to the sale of services and is not relevant to the sale of physical goods.

      I hope this helps.

  3. Hello Good morning.

    As a customer if I were to buy electronic goods from a Chinese retailer who has a European Warehouse, and I purchased goods from said European Warehouse will I be covered by European Union laws regarding warranty?

    Also, if said Chinese retailer states that the only way they will refund me is if I return the damaged goods to China and not to the European Warehouse is that legal? Surely if I purchased the goods from an European Warehouse within the EU I should only be obliged to return the products to said location and not to China.

    Would kindly appreciate any of your advice on the matter.

    Many thanks

    Rogerio Leitao

    1. Hi Rogerio, thanks for posting.

      I don’t think there’s any VAT aspect to your question so it’s not really one for Claire. Also I’m not sure if you were buying as a consumer or a business, which makes a big difference.

      The EU has very clear laws for selling to consumers e.g. see here for the UK implementation but selling to businesses is something else.

      If you were buying as a business I recommend you get specific legal advice. Perhaps you will have some general legal recourse if their marketing was misleading, but otherwise I suspect it will come down to your contract with the seller i.e. the terms and conditions of sale which you should have in writing somewhere.

      Hope that helps a little!

  4. Great article!
    I am an Irish eCommerce website that sells to customers all over Europe B2C.
    My suppliers are in France and the Netherlands and ship to my customers on my behalf.
    For “distance selling” I am under all the thresholds and therefore do not need to register for VAT in my customers country.

    My question is, the VAT that I do charge, is it based on the Irish VAT rates and paid to the Irish government or is it based on the rates of my suppliers countries and paid to their respective governments on MOSS?
    Kind Regards

    1. Ignore my MOSS comment, I see this cannot be used as stated above

      “VAT MOSS (Mini One-Stop Shop) relates only to the sale of services and is not relevant to the sale of physical goods”

  5. HI,



    1. I am launching an e-commerce website for Europe, no services just all kind of shoes and leather bags.
      The goods will get export from non eu countries and then sell through e-commerce ,my concern is do i have to keep stock in the same country i will register vat and Llc after paying custom duty and vat , or i can keep stock anywhere i want in eu and do shipping from there.

      1. Hi Saf
        You will have to VAT register in the EU country where you keep stock for onward sale to private consumers. You can keep your stock in 1 country eg. the UK and then use the EU distance selling rules, whereby you can deliver orders from the UK until you hit set thresholds in the other EU countries ie. Euros 35,000 in all EU countries except Germany, Netherlands and Luxembourg where it is Euros 100,000. Also if you ‘distance sell’ into the UK, the UK threshold is £70,000. This means you can test the European market without a heavy cost of compliance. Please do ask if you have other questions.

    2. Dear SAF
      Thanks for getting in touch.
      If you import directly from Asia to Spain and Germany and then sell the goods from Spain and German to private individuals you will have to register for VAT in Spain and Germany and charge Spanish VAT or German VAT on the sales. The import VAT you paid to Spanish and German customs can be deducted on the VAT returns you will have to file in Spain and Germany.

      You cannot use your Estonian company VAT number for the above transactions.

      If you have goods stored in a warehouse in any EU country and then sell the stored goods to private individual you will have to register for VAT in any country where you use a warehouse.

      Please let me know if you have further questions.

      1. Drop shipping is different.

        If you don’t have s warehouse but purchase the goods from a company who invoices you but supplies them to your customer is the vat charged in the country where you are registered?

        1. Hi Roni

          If, for example, you are a UK company buying from a Spanish supplier who delivers to a German customer, you may have to register either in Spain or in Germany. It depends where you take title of the goods, and whether the supplier charges VAT.

          1. How do you set it up to “take title” so that you don’t have to register in the other countries?

  6. Hi

    For chain transactions – An Irish company A buys goods from Irish company B and requests that B delivers the goods directly to its customer C who is resident in the UK.

    Which of the two transactions is zero rated

    1. Hi Rachel
      One of the conditions for zero rating an intra-community supply of goods is that the customer gives a VAT number of an EU country other than the country from where the delivery is made. As the company A is in Ireland and the company B is also in Ireland, the sale from A to B cannot be zero rate because both have an Irish VAT number. Therefore, the sale from B to C has to be zero rate if C gives a valid UK VAT number.

      1. I’m afraid you may have missed the point

        Company A is in Ireland company B in Ireland

        Company A buys the product from Company B and sells to the end user without vat because the product is zero rated in Ireland

        Company B ships the product to Company A’s customer. This transaction is billed to the customer by Company A

        No vat is charged to the customer because the product is zero rated in Ireland despite the product having been drop shipped by Company B from the UK anywhere in the World

        1. I’m going to try and intermediate here, I hope it doesn’t cause further confusion!

          Rachel’s examples sounds like a dropshipping arrangement although she doesn’t call it that. To quote, “An Irish company A buys goods from Irish company B and requests that B delivers the goods directly to its customer C who is resident in the UK.”

          In this example A (in Ireland) buys from B (in Ireland) then C (in the UK) buys from A.

          The first sale is from B to A and the final sale is from A to C. But I don’t see why that would change Claire’s answer because the businesses involved are in the same countries as if it had been a sale from A to B then B to C.

          BTW Roni, I don’t follow your final sentence “No vat is charged to the customer because the product is zero rated in Ireland despite the product having been drop shipped by Company B from the UK anywhere in the World”.

          I’ll step out now and leave any further technicalities to Claire.

        2. Hi Roni /Rachel

          Unfortunately what you have stated is not possible in relation to VAT compliance – the sale of goods is considered to be from the UK and because of this, the ROI company has an obligation to VAT register in the UK and the UK VAT rate applicable to the products will be applied to any sales until the distance selling thresholds are exceeded in other EU countries.

      2. Hi Claire

        Thank you for your reply

        Andy is correct it is a drop shipping arrangement – all businesses in this instance are VAT registered.

        Therefore i assume the sale from A (Ireland) to the end Customer C (UK) is zero rated as the UK customers VAT number has been provided and goods are being shipped from Ireland to England by company B (Ireland)

        If the end customer was not VAT registered/a private customer in that instance am i correct in stating that company A would charge Irish VAT to customer C up until such as time as the STG£70,000 distance selling threshold in the UK was breached and then a UK VAT registration would be required

  7. On the opposite side – again a dropshipping arrangement – if company A in Ireland ordered goods from company B in the UK to deliver goods to company C also in the UK (all VAT registered entities) in this instance i assume the Irish company would need to register for and charge UK VAT on the end sale to customer C as place of supply and customer both in the UK and company A does not have an establishment in the UK?

    If customer C in the above scenario was a private individual located in the UK – i assume that the distance selling rules would apply and Irish VAT would be charged up until such a time as the UK distance selling threshold has been breached. In this instance to recover the UK VAT charged by company B my client would to avail of the “cross border refunds of Vat in the EU”

    1. The last paragraph is the scenario

      So from what you say, company A in Ireland can supply private customers anywhere in the EU by drop shipping by Company B in the UK to these private individuals anywhere within the EU and charge the Irish Vat on the transaction to these individuals.

      If in the case of these particular products they are zero rated in Ireland then no vat should be levied to individual customers within the EU

      If Company A in Ireland and Company B in the Uk are registered in their own jurisdiction for vat, then the transactions between these two companies should not have vat added surely.

  8. Please find comments as follows:

    To Rachel:

    The 1st paragraph of Rachel comment at 10.03 am is correct however the 2nd paragraph is not correct because as the goods don’t leave UK i.e. purchased from B in UK and sold to C also in UK then UK VAT (not Irish VAT) is due and company A in Ireland has to register for VAT in UK in order to charge UK VAT to company C (in UK). This also applies if C is a UK individual, a registration is required by Irish company A as the sold goods did not leave UK.

    To Roni:

    In reply to Roni’s comment at 2pm, company A in Ireland who supply private customers anywhere in EU (by drop shipping through company B in the UK) must charge UK VAT (not Irish VAT) as the goods are delivered from UK (by UK company B on behalf of Irish company A). In this case as the sale from UK by Irish company A from the UK to private individuals In EU (B2C) the distance sale rules applies i.e. Irish company A must register for VAT in UK and charge UK VAT until the distance sale threshold applicable in the country of delivery is exceeded, then the Irish company A must register in the EU country where the distance sale threshold was exceeded in order to charge the VAT applicable in that EU country (and not in the UK VAT anymore).

    If the product the Irish company sells is zero rated in Ireland – as in your case Roni – then as explained above the sale is taxable in UK. You will need to check whether these products are also zero rated in UK and if yes then the sale would be zero rated. Please note if all what the Irish company A sell from UK is zero rated then it can apply for a dispensation from the VAT registration in UK. Please note that once the value of distance sale (i.e. sales by Irish company A from UK (dropshipped by UK company B) to private customers anywhere in EU) exceeds the distance sale threshold then the Irish company will have to register for VAT in the country where the threshold was exceeded as explained above.

  9. Hi Rachel

    Great article. My situation is more B2B related, so hopefully you can weigh in here.

    Currently our company is based in Cyprus (EU).
    Here we supply 95% B2B, and 5% B2C with our products.

    Our products are currently sourced from the UK (however in the future we may source directly from China, but that’s not any time soon.)

    We are VAT registered in Cyprus.

    We are now looking at selling in Malta (EU). We have found a distribution centre in Malta who will handle all our distribution and money handling etc, so logistics wise, we are good.

    Our UK supplier will be shipping the goods to our Malta hub(EU – EU).
    I’m therefore looking for clarification on the following points.

    1) If our company supplies purely B2B sales to VAT registered companies in Malta, then from my understanding, we are able to sell the products to them with 0% VAT?

    2) If we supply both B2B and B2C, at what point does the €35,000 / year threshold apply? Is it on all sales, or just B2C sales?

    3) If we supply B2C customers, then as long as we are below the €35k threshold, do we charge B2C customers the 19% Cyprus VAT rate?

    4) Can you advise more on Intrastat? Malta is listed as only €700 Arrivals / €700 Dispatches.

    Thanks in advance.

  10. Hello,

    A Company registered in Europe that do drop shipping products from China straight to the end customer should register for VAT?

    The products go from China straight to the customer through postal curriers.

    Who will be liable for VAT, the company that do drop ship (actually acting like an intermediary between seller and customer) or the customer that get direct from china the product.

    Thank you

  11. I think we’re getting mixed up with the drop shipping term. A company that drop ship goods (delivery only) are only providing a service (delivery service) as the goods they drop ship (deliver) are not owned by the drop shipper.

    To determine the VAT liability you need always to see who is the seller and where the sale is being made.

    In regards to your query Ion, if the European company buys goods from China which are delivered by a third party company (drop shipper or delivery company) – if the seller is the importer then the VAT liability will be with the seller. If the buyer is the importer then the buyer will be liable for the VAT. The sale is considered to be made from China by the European Company.

  12. Hi,

    Great Topic!

    Here is my question:

    We are a Canadian company based in the Yukon Territory.
    We would like to sell goods (sporting goods) in the EU (Germany/Austria/France Mainly) to shops and also to customers with having a warehouse in Germany…(B2B mainly and B2C eventually)

    1- I was wondering if I have to register for VAT number if I sell to retailers and also to consumers… If it is under 100 k per year, I have seen, we don’t have to…
    2- When I sell to the Consumer should I sell with no tax because the company is located outside of EU even if the goods are located in a warehouse in Germany or I should change the VAT everytime according to where the good is shipped ?

    Same questions to retailers!

    And in that case where and to whom do I declare all those different VAT from all those different countries…….

    Your help is greatly appreciated!


  13. Wow, this is article is really helpful – Thank you Claire.

    I am hoping you can help advise me on my particular scenario.

    I am about to start using a third party company to feature my products on their website in return for a commission that they will retain from each sale. I will send the goods directly to their customers but from the customer perspective they may be none the wiser that it has come from me and not the website/ company they purchased it from. Am I right in calling this Drop Shipping? Would this website company be an undisclosed Agent?

    The website company is based in the UK (and VAT registered). My (Limited) business is registered and based in Guernsey, Channel Islands- therefore outside of the EU. However, I am also a VAT registered business but I don’t have a business address in the UK. All of my products will ship from Guernsey.

    If one of my products was to be sold from their website they would be charging the customer the retail price plus VAT. They would then take a % of this total price as their commission. I would then be notified of the sale and would dispatch the order directly to the end customer (most likely in the UK)

    In order to send the goods from Guernsey to the UK I pay import VAT (also 20%) to the local Guernsey Post Office which has a Memoranda of Understanding (MoU) with HMRC (they pass on the import VAT to HMRC)
    *If I don’t prepay the import VAT the goods would be held by Border Forces and the end customer would have to pay the import VAT and a processing fee to release the goods. This would obviously not encourage repeat business so that is why I pre-pay the import VAT.

    I am issued with a till receipt that shows the value of the goods and the import VAT I have prepaid.

    I need advice as to who should be declaring and or claiming VAT…

    As I have pre-paid the import VAT on my VAT return should I be reclaiming this as an input tax (box 4) and also declaring the VAT on the sale as an output tax (box 1) – which means they would cancel each other out or does the website company need to declare the VAT (input VAT) on the sale received from the end customer? I feel totally confused with this so any advice would be great.

    As for the arrangement with the website company (UK) and mine (Non-EU) -in theory they are providing a service for me in promoting/ displaying my products on their website to achieve sales- so
    should the website company be invoicing me for VAT on the commission fee for their service?

    As I am based in Guernsey (non-EU) should their supply of service to my business be zero-rated or exempt? I have read VAT Notice 741A: place of supply of services but still don’t fully understand what is applicable to this situation.

    I really hope you’re able to help me. Thanks Nadia

  14. Hi Claire,
    I haven’t started trading with them yet as wanted to work out how I go about it first. What would you advise?
    Who invoices who and what should be included?

    The end customer pays the web company direct and is given a receipt for their order. The web company is never in possession of the goods.

    Thanks, Nadia

  15. This is a classic undisclosed agent arrangement.
    The website company will invoice the final customer and the goods will be delivered from Guernsey. The import VAT is paid by you who is registered for VAT in UK as non-resident.
    The prepaid import VAT to Guernsey post office is an interesting case and difficult to understand because the prepaid import VAT cannot be reclaimed as it is supposed that it is charged to the UK consumer. Instead of the consumer paying the import VAT, it’s the seller who charges it at the sale point and pays it to HMRC. The goods you ship from Guernsey are already sold by the internet company with VAT so the VAT is paid twice once by the consumer (as he receives and is invoiced from the UK internet company) and once by you (import VAT). Unfortunately as things stands the prepaid import VAT represents an additional cost to you which cannot be recovered.
    We think the solution to this is that instead of the internet company being an undisclosed agent they should act as a disclosed agent which means that you should invoice in your own name to the final UK consumer for the goods sold from Guernsey and the internet company will only invoice for its commission. If you would like further information, please email me directly and we can provide a quote for a piece of consultancy work for you in order ensure you are set up properly.

  16. hello, i have recently launched the ecommerce for selling consumer electronic goods. before that have been selling on amazon . where i i have seen a lot of competive prices. if my purchase from distrinutor is 500€ i should add my marging (20€ suppose) plus vat 21%(in italy) plus 7% amazon refferal fee which makes the total 665€ . but small business selling this product for 575€ . how come possible? because i know in the market they will not get better price than 500€.but they still managing the good margin. how come they avoiding vat?

  17. Hi Claire,

    Thanks a lot for your input.

    I am struggling to find concise information on a EU business selling to a non EU consumer.

    1) It says that a EU business can zero-rate a sale under strict conditions. I have gone through as much info on HMRC as I could and it led me to nowhere. Would not you please mind to nudge me in the right direction?

    2) I would also appreciate if you could share some info on whether an e-commerce can use VAT return forms when it sells to a non EU resident.

    Kind regards

  18. Dear Stewart,
    Thanks for getting in touch. Can you please give a little more information:

    What do you sell?
    Which country are you based in?
    Where is your stock based?
    Are your customers businesses or private consumers?

    Can you also please explain further the point 2? Which VAT return forms are you referring to?
    I look forward to hearing from you.

  19. Dear Claire,

    Thanks for your reply.

    I run an online clothing store that sales directly to private customers. The firm is based in the UK. The stock is based in the UK as well.

    I know I can zero-rate a sale provided I dispatch the good to outside of the EU directly from my location.

    My question is essentially whether it is possible for me, as for an online retailer, to be running the Retail Export Scheme (Tax-Free Shopping for Tourists) in the fashion high street retailers do?

    So, for example, a Retail Export Scheme qualified traveler orders a good from my store while on a trip to the EU (i.e. the good is delivered to the customer’s location within the EU) and the invoice contains VAT in it. He/She then takes the purchased product to his/her country of permanent residence and get the invoice stamped by the customs officials. Presented with all the required evidence of the fact that the sold product has been taken outside of the EU by a non-EU resident, will I be able to refund the VAT back to the customer?

    Would appreciate if you could shed some light on the situation described above.

    Thanks in advance.


  20. Hi,

    I am selling clothes from Poland online in the Uk. I am not registered with VAT as my business is small. If i want to sell to EU countries and outside do I have to charge VAt or only if i exceed threshold for the eu country a year?

    1. Hi Kasia.. ae far as I know you have to register any commercial activity (small ones as well). You have to register your company in Poland or in UK (since you’re based in Poland it would have to be Limited structure in UK). Once business is registered it doesn’t have to be registered for VAT until your company reach certain turnover treshhold.. i think current turnover treshhold in UK is about 85000GBP

  21. Hi Claire,
    If I am an Irish registered company, I have a website selling goods to Irish people, they pay for the goods on my website. Then I buy the goods cheaper from china and china post directly to my customer. What happens with VAT? I never see the goods myself.

    1. If the goods are delivered directly from China by China post to the buyer that means the buyer is responsible for the import VAT if the value exceeds the low consignment relief threshold. The seller is considered to be making the sale from China and therefore you should not charge VAT on the sale.
      However, you can choose to account for the VAT if you, the Irish company, imports the goods and pay the import VAT and delivers to the customer then the sale is considered as being made from Ireland and therefore Irish VAT is due.

  22. Hi,

    I have a scenario, for which i could not find a correct answer in most of the sites. It would be helpful if you could clarify it for me.

    This is a triangular sale, where,

    The US Company (Address in US), Sources material from its German plant (Germany plant belongs to the German company code), and sells it to end customers or its other company code customers.

    2 Invoices are generated.

    Customer Invoice: US company charges End customer.

    Intercompany Invoice: Germany company code charges US company code.

    My question is, is the Intercompany invoice taxable? i.e should VAT of 19% be charged on the intercompany invoice?

    The thing to note here is the Goods are directly shipped out of Germany to the end customer, like a drop Ship.
    As this is technically Ship-from Germany to Outside Germany, is it taxable?
    Please let me know!


  23. The US company is regarded as purchasing and selling goods from Germany so they will need to register for VAT in Germany and file German VAT returns.

    The German company code (inter-company invoice) should charge the USA company code 19% German VAT which can be recovered on the VAT return. Sales by the US company to the end customer, if the end customer is an individual, will attract 19% VAT under the distance sale rule.

  24. Hi Claire,

    I have a question on the fulfilment section. If a EU business, already registered in the EU country it is based in, has its fulfilment center in the UK, but whose sales in the UK are below the threshold, does it still have to register for VAT in that country?

    And if it has to register, does it have to pay UK VAT, although sales are below the threshold? (the business pays VAT in the country it is established in)

    1. Hi David, thanks for getting in touch. As soon as stock is in the fulfilment centre for onward sale this triggers an immediate need to VAT register in the UK. There is no threshold to exceed. This is true when stock is held in any EU country. UK VAT will have to be collected on any sales made from that fulfilment centre to UK customers and to private consumers in other EU countries until the distance sales thresholds in the other EU countries are exceeded. At this point, a local VAT registration is required in that country and local VAT will be charged.

  25. I have a 3PL bonded warehouse in Amsterdam requesting invoices on free goods (samples, warranty products, etc.) shipped from their facility. Is VAT really based on the cost of goods even if we don’t sell them to the recipient?

    Our 3PL says that it is, but this makes no sense to me. Every article I see about VAT discusses sales, nothing mentions free goods.

    1. Hi Steve, we are not customs experts, but our opinion is as follows:

      In the UK the importation of sample goods qualifies for import duty and VAT relief. For warranty goods when they returned they have been replaced free of charge under warranty, no duty is payable however, VAT is payable on the full value of the goods because all replacement items are treated as new goods for VAT purposes.

  26. Hi Claire,

    Very informative article indeed that leads me to ask you the following question:

    Our business is registered as a Limited company in the UK selling online to consummers in the UK, EU and outside the EU, but so far not VAT registered as we are under the turnover threshold.

    We purchased on all goods from Italy with VAT paid to suppliers in Italy and goods where delivered to the UK.

    One of our registered compay director moved to France and we decided to transfer all our stock to France at his home address and ship to all our customers out of France.

    Does it mean that we are operating as a fulfillment centre in France ? Do we need to register for VAT in France and in the UK ?

    Thanks for clarifying.

  27. Hi Chris
    As the stock is now moved to France then the transfer of stock is considered as a taxable intracommunity acquisition of goods in France so the French business has to register for VAT in France if the annual value of the acquisitions exceed the threshold of €10,000. If, however the value of the acquisition does not exceed the annual threshold of €10,000 then no VAT registration is required.

    If you register for VAT in France because you exceeded the threshold for the acquisitions or you voluntary choose to register then the Italian supplier will not charge you Italian VAT, you will only need to give the supplier your French VAT number in order to invoice you without VAT. Please let me know if you need further help or would like us to register you in France.

  28. I would be so very grateful if you could help me!

    I am a US seller based in the US. I have a customer in the UK who wants to buy a digital product from me as well as physical goods (fabric & sewing supplies.)

    For the digital product, I know that I can use a 3rd party (like Taxamo to manage the VAT transaction and requirements there, but I’m not sure what to do about the physical product.

    One idea I had, was to just create a “package” that has all the costs rolled up of the physical and digital product and sell that on the 3rd party site. That would collect the VAT for everything, and then I could ship the product to the customer.

    But it sounds like once the product gets to the UK, it will be held and the customer will have to pay VAT again?

    I currently only have one customer who potentially would even do this, and even if I opened up my entire business to the UK I wouldn’t come anywhere near a 35,000 pound threshold… but I’m not entirely sure that what I want to do is possible/legal.

    I want to comply with the laws and also not cause my customer to pay for something twice. Thank you so much!!!

    1. Hi Ebony
      For the physical product that you deliver from USA it will be an export for you so you should not charge any VAT or tax and the customer will have to pay the VAT to UK customs if the value exceeds the value of £15.

      The UK customer will have to pay the VAT to customs on any purchase they make from outside the EU.

      For information, there is no £35,000 threshold in the UK. There is a £83,000 threshold for VAT registration for local UK established businesses and there is a £70,000 distance selling threshold for sales from another EU country into the UK.

  29. Hi Claire ,

    I am planning to sell on Amazon and doing lots of research at this stage. I was going to register a limited company in Austria where I live and then import the goods to Germany where amazon has a fulfillment center . as I understand from your article I should register for VAT in Germany. correct me if I am wrong please . But I have heard that it is better if I registered my company online in the UK as It offer advantages in terms of VAT if wish to sell in all 5 Amazon European marketplaces. I would appreciate if you could shed some light on this .
    thanks in advance.

  30. Hi Neda

    If you VAT register in Germany, and place stock in the Amazon DE fulfilment centre, any sales delivered from the German warehouse will come under the EU VAT distance selling rules. German VAT will be applied to those sales until set thresholds are exceeded in the other EU countries. Check with Amazon to see if you can access the Amazon EU marketplaces from Amazon DE. I cannot see why having a UK company would be an advantage, if you can achieve the same from a German VAT registration.

  31. Hi, although very clearly stated and easy to read, I am missing answers to my specific question.

    We are a UK company selling home deco products to webshops within UK and within EU. We offer direct drop shipments to the end users of our web shop customers under private label and customized B/L. This all works fine. So far so good.

    But now we have the same request from a Norwegian customer. To save time and money, we wish to drop ship to his end users in Norway under private label.We will use a courier service for this like f.e. DHL, like we do with more (EU) export markets.

    All doable, but…as Norway is no EU (no need to make any funny comments on Brexit, we are aware and will deal with that then when needed… ), no free traffic of goods. Shipments need to hold a commercial invoice for customs reasons. We will invoice ex VAT to our Norwegian customer/web shop owner. Norwegian end user ordering the product with the norwegian web shop will pay invoice including VAT. Norwegian web shop will pay this VAT to tax officer in Norway.

    We can even arrange to include in the shipment a copy of the original Norwegian invoice in Norwegian Kronor including VAT in the name of the norwegian web shop customer, stating the reg and VAT number addressed to the end user/recipient.

    But will Norwegian Customs accept this and release the goods? So we can deliver to Norwegian end users their in advance paid for goods, without running the risk that customs might hold goods or ask end users to pay VAT?

    Hope you can help/assist?

    Many thanks,


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