EU VAT and E-Commerce Sales: 10 Common Misconceptions Clarified

New fee-added tax (VAT) rules for e-trade income take effect in the EU. Although an awful lot has been written about the brand new policies (“e-commerce VAT package”) and the EU itself has produced numerous guidance files, groups still struggle to get a firm grasp on the notably complex rules.

While the overall objectives and principles of the e-trade VAT package appear to be nicely understood, “the devil is in the details,” and this info will, in the long run, determine whether or not a business is compliant or no longer.

This article clarifies ten commonplace misconceptions about the new EU VAT guidelines for e-commerce income.

Misconception 1: New Rules Affect All E-Commerce Sellers

Although the e-trade VAT package introduces a way-accomplishing adjustment that each EU and non-EU seller must know, its scope is confined to business-to-consumer (B2C) conditions. The new regulations will affect any supplier who (1) sells items and offerings to consumers in the EU and (2) is concerned (even in a roundabout way) with the delivery of the products. If your clients are VAT-registered businesses or deal with the transport of the products themselves, you do not need to fear the brand new provisions.

Misconception 2: One-Stop Shop is Mandatory

The foundations of the e-trade VAT package deal are 3 One-Stop-Shop (OSS) schemes: the Union scheme, the non-Union scheme, and the import (IOSS) scheme.

The Union and non-Union schemes allow organizations to sign up in a single EU u. SS.A.For the functions of putting forward VAT due in all EU international locations where their clients are located.

The import scheme allows organizations to import items VAT-free: the seller expenses VAT of the patron country at the time of the sale instead of paying import VAT when the products enter the EU territory.

All three schemes are optional. Although they are searching to simplify compliance, there are also practical reasons not to use them. As you can not deduct VAT in your OSS, groups incurring massive expenses in different countries may opt for local registrations over an OSS scheme.

Misconception 3: Union Scheme is for EU Businesses Only

A not-unusual misconception is that EU organizations can use the Union scheme, whereas the non-Union one is designed for organizations established outside the EU.

This is proper as far as supplies of services are concerned. Non-EU agencies use the non-Union scheme, and sellers installed inside the EU register for the Union scheme for offerings. However, non-EU organizations can also sign up for the Union scheme if they carry out intra-EU distance sales of products (i.,  sales of products from one EU country a to every other). Such income is not included in the non-Union scheme that applies exclusively to services.

As each scheme covers specific components, a non-EU enterprise may turn out to be registering for all three schemes: the Union scheme for substances of goods positioned inside the EU, the non-Union system for materials of services, and the import scheme for sales of products imported from 0.33 nations.

Misconception 4: One-Stop Shop is Only for Sales Above 10,000 Euros

While an EU-based dealer sells physical items or virtual offerings to customers in other EU international locations, it ought to price the VAT of the customer’s country. The seller might also prefer to use the Union scheme to avoid VAT registrations in countries where its clients are placed.

However, there’s a simplification for EU groups whose income from digital products and distance sales of goods to consumers in different EU nations does not now exceed 10,000 euros ($12 a. Such corporations should not price the VAT for their customer a but may also practice their nearby VAT.

This exception is issued under strict conditions:

The enterprise is established in the most effective one EU member nation; it manufactures goods best from its use of the status quo; its revenue from the income of products and virtual services to customers in different EU nations (and no longer its general sales) does not exceed 10,000 euros. The threshold isn’t counted one by one for goods and digital services supplies, but the sum of a majority of these elements should not now exceed 10,000 euros for the brink to use.

The seller may also choose to dismiss the threshold and to charge the VAT of the purchaser’s country, registering without delay in the purchaser’s United States of America or for the OSS Union scheme. If it decides to do so, it will likely be particular by this selection for two calendar years.

Misconception 5: Non-EU Businesses do not Require a Tax Representative

A non-EU enterprise promoting virtual offerings to EU customers may additionally check in for the non-Union scheme at once with the tax authorities of an EU member country of its preference. A tax consultant is not wished. However, EU member states may require non-EU agencies to sign up for the Union scheme to appoint a consultant.

A non-EU business that wants to use the import scheme should appoint an intermediary for this purpose. An intermediary is an EU-based business that is prone to remit VAT. It fulfills the VAT responsibilities laid down within the import scheme in the name and on behalf of the person represented.

The obligation to hire an intermediary is waived for non-EU dealers established in a country with which the EU has concluded an agreement on mutual help for the recovery of VAT (Norway, the U.K.) and who send goods from that country a. However, as quickly as this type of vendor starts offevolved delivering goods from different third nations, it has to appoint an intermediary to apply the import scheme.

Misconception 6: One-Stop-Shop Covers all Sales of Goods to EU Consumers

The OSS Union scheme applies most effectively to sales of products shipped from one EU usa to another. This means that if an enterprise sends goods to customers in the United States, it has to declare them in its domestic VAT return. For example, a Belgian store promoting interests from its Belgian warehouse to both Belgian and Dutch customers may also use the OSS Union scheme to ship products to the Netherlands. However, its Belgian neighborhood sales need to be declared on the Belgian VAT return.

There is the best one state of affairs in which local income from goods is declared through the Union scheme: a non-EU commercial enterprise sells goods positioned within the EU, and an online marketplace facilitates this sale.

Misconception 7: One-Stop-Shop Does Not Cover Sales Into the U.K.

Although the U.K. It is not a part of the EU; the EU VAT policies apply to the importation of products between the EU and Northern Ireland. Northern Ireland has a twin VAT regime: it follows the EU VAT rules for the payment of goods, but it’s treated as a non-EU country for sales of services. This way, the income of products (but not offerings) to consumers in Northern Ireland can be declared through the OSS Union scheme.

Businesses in Northern Ireland can also check in for the OSS Union scheme if they sell and ship goods from Northern Ireland to EU customers. However, if they provide offerings or ship goods from different parts of the U.K. To the EU, they will check in for the non-Union scheme or the import scheme, respectively.

Misconception 8: Import Scheme Applies to Goods Below 150 Euros

The import scheme applies to the income of products imported in consignments whose intrinsic value does not exceed 150 euros. Thus, the price of the shipment and not the price of the products has to be below 150 euros.

A “consignment” is defined as goods packed collectively and dispatched by the vendor to 1 purchaser. When a couple of orders from the same client are packed and transported together, they form a single consignment. If a client purchases one object for eighty euros, the seller may also apply the import scheme because the consignment value exceeds 150 euros. However, if the customer orders two copies of this object, the import scheme cannot be implemented, as the consignment price is 160 euros.

Misconception 9: EU VAT Number can be used for all Special Schemes

Each scheme requires the use of a unique identity number. For the Union scheme, the vendor is identified with the identical VAT quantity that it uses for all different intra-EU transactions. If a non-EU commercial enterprise registers for the Union scheme, it’ll be allocated a VAT range through the EU member country of registration.

For the non-Union scheme, a non-EU business may be allotted an extensive variety inside the layout EUxxxyyyyyz. This wide variety can only be used to declare resources that fall under the non-Union scheme. Similarly, a commercial enterprise applying the import scheme can be allotted an IOSS VAT identity range within the layout IMxxxyyyyyz.

Misconception 10: Tax Invoices are Obligatory in E-Commerce Sales

Although invoices are commonly issued in e-trade transactions, there is no presumption of duty to trouble a bill for sales protected with the aid of any of the special schemes. If the seller chooses to dispute an account, the EU user. S .. Where the miles are registered, follow. However, if the vendor performs intra-EU distance sales of products but does not use the Union scheme, it is obliged to issue a bill following the rules of the patron’s usa.

The critiques expressed in this article are those of the author and do not always replicate the perspectives of any businesses with which the writer is affiliated. Aleksandra Bal is the Indirect Tax Technology & Operations Lead at Stripe. To examine more unique articles, log in. To read more about a subscription, click here.