If you have a small or medium business, you might be thinking to use a marketplace such as Amazon or eBay, or even develop your own website to sell your products online. So many options! Are you also confused which is the best way to go?

Whatever your choice is, you’ll need to keep in mind that ignoring the rules and regulations of selling across borders could leave you exposed to hefty fines. You can’t ignore VAT and get away with that!

What is your VAT situation

This isn’t something easy, as there are several factors you need to take into consideration such as what, where and who are you selling to.

Here are a few questions eCommerce sellers should ask themselves to better understand their VAT position.

• Is your business located inside or outside the EU?
• Are your clients businesses or individuals?
• Are you selling goods or services?
• Are your customers located inside or outside the EU?

Either way, you should be aware that you are subject to the European VAT online selling regulations. Keep in mind that there are some exceptions. To find out more on this topic, head to the European Commission or Web Retailer.

Know your thresholds

If your business is based in the EU and you sell goods to consumers in any of the EU member states, you should keep tabs on your annual sales value (postage included) to see whether it falls below the threshold set by that specific country or not. If your sales are below this value, you don’t need to register for VAT.

It’s worth mentioning here that thresholds vary from one EU country to another. In addition, some of them are rather low. This is the case of Poland, with a threshold of €35,000. At the other end of the spectrum there is Germany with a margin of €100,000.

If your customers come from multiple countries, you may want to look into the opportunity of using a software that monitors your sales volume and the thresholds of the different countries. The other downside of not registering for VAT is that you may make your sellers liable, thus experiencing negative customer feedback. Make sure you consult the list of thresholds in order to gain a clear understanding of your position.

Another European country to store goods

If you intend to use a fulfillment center in the EU to sell to your customers, you have to register for VAT in that specific country, regardless of whether your business operates through a marketplace such as Amazon or not. For instance, when using the Amazon Pan EU program, which allows you to store your goods in up to seven EU countries, you would automatically need to register for VAT in seven different countries.

Failure to comply may attract severe penalties, huge backdated payments and it may even trigger the shutting down of your online marketplace seller account.

According to a Tamebay report, the European Commission has envisioned new standards concerning the transparency and the fairness of online platforms, out of the desire to support small and medium businesses. Consequently, if your account is suspended, the marketplace will have to provide ‘a statement of reasons’.

Track of your invoices and sales

Invest in reliable sales information tracking systems that can detect and track the countries your customers are in. If you find it hard to do this manually, take advantage of the technology progress and get one of the software options available today to do it for you.

For a smooth selling process, consider investing in technology that can help you keep tabs on your sales, shipping schedules and invoices.

VAT

All European countries have VAT, but each of them has a different VAT rate and its own name for this tax. For instance:

TVA – France

IVA – Spain

MWST – Germany

In order to implement all these into your business operations, you should hire an expert in VAT to help you.

VAT Rates

Know the VAT rates that apply to your goods or services.

Each different country has its own classification system. VAT rates may vary from 17% to 27%, so you need to ensure that your clients will be charged the right VAT rate for their country.

Register for VAT

How long does it take to become VAT registered?

Consider allowing anywhere between three to ten weeks to obtain your VAT registration. Timings may vary from country to country, so you should rather allow the maximum, just to be on the safe side.

Ensure Compliance

Once you get VAT registered, ensure you comply with the requirements of each state in regards to deadlines and frequencies. Check with each individual member state whether they have a monthly, bi-monthly, quarterly, bi-annual or annual frequency.

Ensure that you don’t need to observe and comply to the following reporting requirements:

If you are using Amazon’s Pan EU service, you may have to file an EC sales list or an Intrastate Declaration.

Digital Goods

Digital goods are a real goldmine when it comes to VAT. All sales of digital services in the EU are subject to VAT MOSS. This list includes telecommunication services, broadcasting and digital services (apps included). The European Commission has proposed the implementation of a threshold for Cross Border sales of electronic services. This threshold is going to be €10,000 and it may be introduced this year.