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This article describes the VAT treatment and VAT obligations of e-commerce companies selling goods to private individuals across the EU. By private individuals we mean customers that are not registered for VAT.
When goods are sold in the internet and shipped over to the customer in another EU country, the seller has the option to charge the VAT rate of the sending country or the VAT rate of the recipient country. This option is only available when the total amount of sales in the customer´s country is below the distance sales threshold. When the annual value of sales exceeds this threshold, the seller is obliged to get a VAT number in the country of the customer and charge VAT at the customer´s country VAT rate.
The distance sales thresholds are different in each Member State, however, they are usually €35,000 or €100,000 (or the equivalent in local currency). Big E-commerce countries like Germany, Luxembourg, Netherlands or UK have a €100,000 threshold. But Spain, Italy, France, Belgium, Finland or Austria have a €35,000 limit. For example, a UK business sells t-shirts through the internet to private individuals in many EU countries, Germany among them. The distance sales threshold in Germany is €100,000 and the German VAT rate is 19%. As long as the total value of annual sales in Germany is below €100,000, the UK business can choose to apply the UK VAT rate or the German VAT rate. In case the company opts to charge German VAT or the threshold is exceeded, a VAT registration is required in Germany. In this article, you can check what are the typical documents required for a VAT registration.
Once VAT registered in the country of the customer, the distance sales business must meet a number of obligations in each country of registration. All VAT registered businesses should file VAT returns. The frequency of filing, due dates and data requirements for these returns are different in each country. Intrastat returns may also be required when the Intrastat threshold is exceeded (consult here our updated table on Intrastat thresholds), although there is no consistency among Member States about the requirement to file Intrastat returns for distance sales businesses. Similarly, a compliant invoice according to the invoice rules in the country of the customer is only required in a few countries.
Marosa has extensive experience managing the treatment of E-commerce VAT obligations of businesses around Europe. We can assist your company with VAT registrations, VAT returns or reviewing the current VAT compliance to ensure that all requirements are met.