In case you sell goods or services to customers in the European Union from outside the EU, it is important to know the distance-selling VAT regulations. The reporting, registration, and VAT collection requirements of non-EU sellers are different than those of local businesses. This guide describes what to expect.
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Understanding Distance Selling
This involves the selling of goods or services to consumers in a foreign country, which is usually through online shopping platforms. In the case of non-EU sellers, this equates to selling to EU citizen members of any of the EU member states. These transactions are concerned with consumer protection and the collection of VAT.
Prior to 2021, the sellers outside the EU did not have to be concerned with VAT unless they went over the country-specific limits. But with the EU VAT e-commerce package, new requirements make compliance easier and broaden the scope of the VAT.
Registration Obligations
Non-EU vendors have to register for VAT in the EU when they provide goods or digital goods and services. Registration can be done in a number of ways:
· Import One-Stop Shop (IOSS): This applies to goods imported into the EU with an import value of up to € 150. Non-EU sellers may apply to IOSS in any EU member state. This enables them to collect VAT at the point of sale and present it in one monthly return instead of registering in various countries.
· Traditional VAT Registration: Non-EU sellers might have to register in the country of entry to the EU for goods exceeding € 150, or in specific sales not subject to IOSS. This makes sure that VAT is paid to the relevant bodies.
With this company, you can select the appropriate registration method based on products, sales volume, and logistics. Low-value goods are generally better served with the IOSS since they do not require any delays in customs.
Reporting Requirements
After the registration, non-EU sellers are required to submit VAT to the EU authorities on a regular basis. This is done through a monthly VAT return with IOSS, which is a unification of all sales in the member states of the EU. The return reflects the amount of sales, VAT collected, and the outstanding.
In the case of traditional VAT registration, sellers might be required to make country-specific VAT returns. This is computed on a member-country basis of sales. Record-keeping should be accurate to evade fines and facilitate the audit process.
VAT Collection Obligations
Sellers outside the EU should impose VAT at the rate imposed in the country of the buyer in the EU. In the case of IOSS-registered sellers, VAT is paid at the cashier desk. Hence, customers pay the entire price, including VAT.
In the case of traditional registration, VAT is paid at customs. This can cause slow delivery if not done well.
Lack of proper VAT collection can attract fines, shipment blockage, and image damage. It also introduces more administrative burden to rectify errors and match payments with the tax authorities.
Last Thoughts
EU and non-EU vendors must understand how to deal with the IOSS or the conventional VAT registration, charge the correct VAT, and file the returns on time. However, this may be a complicated process. Hiring professionals can make VAT compliance easier and help you remain completely EU-compliant.
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