Common VAT Mistakes Online Businesses Make (And How to Avoid Them)

Navigating VAT obligations can be particularly complex for online businesses, especially those selling across borders. Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences. As e-commerce continues to grow, understanding the specific VAT requirements in each market is essential, exploring the most frequent VAT errors made by online sellers and offers practical guidance on how to avoid them will help businesses stay compliant and focused on growth.

Why VAT Compliance Is Crucial for Online Businesses

VAT compliance is essential for online businesses operating in today’s global digital economy with customers across multiple countries, each with its own VAT rules, failing to comply can lead to hefty fines, legal trouble, and reputational damage.

Some of the key reasons to stay VAT compliant include the following ones.

Avoiding Penalties and Fines

Non-compliance can result in significant financial penalties, interest charges, and even legal action from tax authorities. Even, in the most extremely cases, the Tax Authorities can remove your VAT registration in a country when the non-compliance is recurrent, which disrupts business activity in such jurisdiction.

Customer Trust and Credibility

Accurate VAT handling shows professionalism and builds trust with customers, especially business clients who require valid invoices for their own tax reporting. In addition, improper non-compliance can affect our clients' right to deduct VAT or, in the most serious cases, make them liable for VAT tax debts if the authorities consider that there is a VAT fraud.

Smooth Business Operations

Compliant businesses are less likely to face audits, account freezes, or disruptions due to tax issues, ensuring continuity and operational stability. This also improves their internal procedures and help them to support growth and international expansion without facing unexpected tax obligations or regulatory setbacks.

Top VAT Mistakes Online Businesses Make

VAT compliance is a critical aspect of running a successful online business, yet many sellers unknowingly make costly mistakes. Understanding the most common VAT errors is the first step toward avoiding penalties and ensuring smooth operations.

1. Failing to register for VAT in the required jurisdiction

One of the most common mistakes that companies is related to the absence of registration for VAT purposes in a country when they should be registered according to the applicable VAT rules. Systems like the EU’s One-Stop Shop (OSS) help companies to manage VAT compliance, but sellers must still be aware of when and where registration is needed. Ignoring these requirements can lead to backdated tax liabilities, penalties, and interest charges. For example, typically, storing goods in an EU country calls for a VAT registration in such country.

Learn more about How to register for VAT.

2. Applying the Wrong VAT Rate

Using incorrect VAT rates for different goods, services, or countries can lead to underpayment or overcharging customers, both of which can trigger audits or customer dissatisfaction.

Please consider that most countries have a one or several reduced VAT rates that apply apart from the standard one. Also, in some cases VAT rates change temporarily based on extraordinary circumstances, such as Covid, war, inflation scenarios, etc. To be compliant, it is key to be on top of these changes.

Take a look at our overview on VAT rates in Europe.

3. Missing VAT Filing Deadlines

Missing VAT filing deadlines is a critical error that can result in financial penalties, interest charges, and even the suspension of a business’s VAT number in some jurisdictions. VAT returns must be submitted regularly—usually monthly or quarterly—depending on the country’s regulations and the size of the business. Each jurisdiction has strict deadlines, and late filings, even by a day, can lead to automatic fines or trigger audits from tax authorities. This is especially risky for online businesses operating across multiple countries, where managing different filing calendars becomes more complex.

Find a general overview of VAT due dates in Europe. VAT compliance software like Marosa’s VATify can greatly help you managing VAT compliance deadlines in multiple countries.

4. Changes on the VAT Rules

VAT rules are constantly evolving, especially for international transactions, making it easy for online businesses to fall out of compliance. Changes in tax rates, reporting obligations, and thresholds can lead to costly mistakes if not monitored closely. Staying updated through official sources, tax advisors, or automated compliance tools is essential to avoid penalties, ensure accurate filings, and maintain smooth operations in a fast-changing global tax landscape.

How to Avoid These VAT Mistakes: Best Practices for Digital Sellers

Digital sellers can avoid VAT mistakes by staying updated on international VAT rules, using automated compliance tools, and keeping organized records. Consulting tax professionals further ensures accurate filing and reduces risks of penalties.

1. Get the Information Right

Staying updated on international VAT rules is essential for businesses operating across borders to maintain compliance and avoid costly penalties. VAT regulations can differ significantly between countries and often change due to new legislation, economic policies, or international agreements. Find below some general recommendations:

• Subscribing to reliable VAT newsletters
• Leveraging automated compliance software can help businesses keep pace with these updates
• Also, relying VAT experts for tax advise will be key in some instances.

Similarly, to avoid errors on VAT rates, businesses should maintain accurate product categorization, stay informed on country-specific VAT rules, and consider using automated tax software that updates rates in real time based on the customer’s location and product type.

2. Automate the VAT Compliance Process

Using automated compliance tools is crucial for businesses managing VAT across multiple jurisdictions. These tools simplify the complex process of calculating correct VAT rates or meeting filing deadlines. Automation reduces human error and streamlines record-keeping by organizing invoices and transaction data efficiently, minimizing the risk of audits or penalties.

By integrating automated VAT software into their operations, businesses save time, improve accuracy, and maintain compliance effortlessly, allowing them to focus more on growth and customer service instead of navigating complicated tax regulations manually.

3. Keep your VAT Records Organized

Keeping organized VAT records is a fundamental aspect of VAT compliance for any business, especially those operating online and across borders. Accurate and well-maintained records of invoices, receipts, transactions, and tax filings ensure that businesses can provide evidence during audits, support VAT claims, and submit correct returns. Disorganized or missing documentation can lead to errors, penalties, or denied deductions. Digital record-keeping systems help streamline this process by securely storing and categorizing data, making retrieval easy when needed. Good record management also supports transparency, simplifies financial reporting, and ensures that businesses meet the legal retention requirements set by tax authorities in various jurisdictions.

How Marosa Helps Online Businesses Stay Compliant

Marosa can help online businesses stay VAT compliant by offering tailored services and tools that simplify and automate tax-related processes

1. VATify: Automated VAT Filing and Reporting

Vatify is the VAT compliance software you need to automate the filing and manage VAT obligations efficiently and accurately. VATify is a comprehensive data analysis and VAT reporting software to comply with e-Invoicing and VAT filings globally which helps our clients to reduce manual work and minimize the risk of human error. This ensures that all calculations align with current tax laws and country-specific requirements, helping businesses meet strict filing deadlines. By streamlining VAT reporting, businesses save time, stay compliant across multiple jurisdictions, and focus more on growth rather than administrative tax tasks.

2. Identify and Monitor your VAT Registrations

Marosa can help online businesses stay VAT compliant and provide support by identifying when VAT registration is required based on the activity described and the applicable VAT rules from different countries. We have a dedicated VAT registrations team assisting with the VAT registration process across jurisdictions and managing all communication with local tax authorities. For cross-border sellers, we can help you also with OSS (One-Stop Shop) and IOSS (Import One-Stop Shop) registrations and reporting.

Discover all you need to know about the different One-Stop-Shop Schemes.

3. VAT Advisory Services and Training

Marosa can provide VAT advisory services involves guiding online businesses through complex VAT regulations to ensure compliance and optimize tax efficiency. This includes assessing when and where VAT registration is required, advising on cross-border transactions, identifying applicable VAT rates, and determining eligibility for schemes like the One-Stop Shop (OSS) or Import One-Stop Shop (IOSS). Ongoing advisory support ensures businesses stay up to date with regulatory changes, avoid penalties, and make informed decisions in new markets. This service is crucial for sustainable and compliant international growth.

Also, we can train you and your team with VAT training adapted to your needs.

4. VAT News Updates

Marosa issues a monthly newsletter where subscribers can find the latest VAT news. Also, when using Marosa's VAT compliance services, the team often shares relevant changes on legislation that may impact the taxpayer in the countries in scope of our services.