Guides » International Selling

European Ecommerce and VAT: The Essential Guide

By Claire Taylor

If you sell to buyers in the EU you need to know how VAT impacts your business. How do you ensure you follow the rules, and what happens if you don't?

European Ecommerce and VAT: The Essential Guide

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Anton

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!

Claire Taylor

Replying to Anton

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… Read more »

Monique

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?

Claire Taylor

Replying to Monique

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… Read more »

Rogerio Leitao

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… Read more »

Andy Geldman

Replying to Rogerio Leitao

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… Read more »

Philip

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

Philip

Replying to Philip

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”

Roni Lennon

Replying to Philip

Interested to hear an answer to Philip’s question as I have the same scenario

Claire Taylor

Replying to Roni Lennon

Hi Roni

Can you give me a little more information about your circumstances? Do you sell goods or digital services?

Claire Taylor

Replying to Philip

Hi Philip. Can you please tell me if your suppliers are charging you French and Dutch VAT?

sadaf khan

HI, I AM AN NON EU NATIONAL AND RESIDENT OF POLAND ,I AM PLANNING TO OPEN MY OWN E -COMMERCE BUSINESS IN EUROPE,I WILL EXPORT SHOES AND BAGS FROM ASIA TO SPAIN AND GERMANY THEN SELL IT THROUGH E COMMERCE WEBSITE ALL OVER EUROPE. IF I IMPORT GOODS FROM NON EU COUNTRIES CAN I DIRECTLY EXPORT TO SPAIN OR GERMANY UNDER MY ESTONIAN COMPANY/ VAT ONCE I EXPORT AND PAID VAT AND IMPORT DUTIES IS IT NECESSARY TO KEEP MY STOCK IN ESTONIA ,OR I CAN MAKE WAREHOUSE ANYWHERE IN EUROPE AND SELL IT THROUGH E-COMMERCE UNDER ESTONIAN VAT SYSTEM… Read more »

Saf

Replying to sadaf khan

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.
Thanks

Claire Taylor

Replying to Saf

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… Read more »

Claire Taylor

Replying to sadaf khan

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… Read more »

Roni

Replying to Claire Taylor

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?

Claire Taylor

Replying to Roni

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.

Roni

Replying to Claire Taylor

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

Rachel

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

Claire Taylor

Replying to Rachel

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.

Roni

Replying to Claire Taylor

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

Andy Geldman

Replying to Roni

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… Read more »

Claire Taylor

Replying to Roni

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.

Rachel Murphy

Replying to Claire Taylor

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… Read more »

Rachel Murphy

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… Read more »

Roni

Replying to Rachel Murphy

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… Read more »

Claire Taylor

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… Read more »

Paul

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… Read more »

Ion

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

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