How does VAT work on sales via online marketplaces in Europe?
When you are selling your goods online via an online marketplace, the rules may deviate from the general VAT regulations for e-commerce in Europe.
Sales of goods made via an online marketplace such as Amazon or eBay will, in some cases, make the marketplace liable for VAT on that supply. This means that it is the marketplace, and not the seller, who will collect VAT from the final client and transfer that VAT amount to the relevant tax authority.
When is the marketplace liable for VAT?
A marketplace is considered to be involved in a supply when it sets the terms of the supply either directly or indirectly, it is involved in authorizing the payment, or it is involved in the delivery of the product. Meeting any of these three conditions would mean the marketplace is considered as involved in the supply.
When the marketplace is involved, there are two scenarios in which the marketplace becomes liable for collecting and paying VAT:
- Sales of goods by a non-EU e-commerce seller made via an online marketplace.
- Goods imported into the EU with a shipment value below 150€ to be sold to an EU customer via an online marketplace.
The chart below was published by the European Commission to illustrate the scope of the marketplace liability:
Mechanics of the deemed supply between the ecommerce seller and marketplace
When the marketplace is considered to be liable for the payment of VAT, there is a fiction of purchase from the online seller and supply to the final customer. This is deemed a purchase and a sale considered only for VAT purposes.
The supplier will make an exempt sale to the marketplace. The marketplace will then charge and collect VAT from the final client.
Regarding invoicing requirements, the following scenarios can take place:
- Leg 1: Deemed supply to the online marketplace.
There two scenarios:
- Distance sales of imported goods: This is an exempt supply. No need to issue an invoice. This supply is outside of the EU VAT rules.
- Supply of goods within the EU by a non-EU supplier: An invoice should be issued by the supplier to the marketplace. The Commission already confirmed that self-billing arrangements can be made according to local invoicing rules in the relevant country.
- Leg 2: Deemed supply by the online marketplace to the final customer.
There are also two scenarios:
- Distance sales of imported goods: The marketplace should charge and collect VAT at the applicable VAT rate. This is a B2C supply so there is no obligation to issue an invoice, although some Member States may still impose the issuance of an invoice according to Article 221 of the VAT Directive. Contact us to know in which countries an invoice would be required.
- Supply of goods within the EU by non-EU supplier: There are two options applicable in this scenario:
- a) Domestic supply of goods: An invoice does not have to be issued unless the country requires it according to article 221;
- and b) Intra-Community distance sales of goods according to the Union OSS scheme: An invoice does not have to be issued. In the unlikely case that this supply is not treated under the Union scheme, an invoice will be required.
The rules are similar to those already applicable in the UK.