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Tax on distant selling

You don’t need me to tell you that selling via the internet or distance selling has experienced explosive growth in recent years.  However an interesting fact for you is that e-commerce sales are expected to account for over 20% of retail selling in the EU within the next few years.

This brings increased responsibility to retailers in terms of understanding VAT liabilities and charges in each EU state.

Businesses that sell goods to consumers in other countries will face an obligation to charge and collect local consumption taxes.  To help, the EU has created a ‘Distance Selling’ regime to help and simplify the burden this may cause.

So what are the rules?

Retailers can initially sell to private individuals in other EU states under their local VAT number and their home VAT rate.  For example, a UK retailer sells products to Germany at the UK VAT rate of 20% instead of the German VAT rate of 19%.

Once you pass the respective country’s distance selling annual threshold, you must register as a non-resident VAT trader in that country. To give you an idea of the thresholds for the more popular EU countries here they are below:

You will then continue to sell, but charge the local VAT rate.  Once registered in the new country, there are EU VAT compliance regulations to follow.  This will mean ensuring that invoices are issued according to local laws and regular VAT returns will have be submitted to the respective countries.

If you would like to discuss any of the points raised or tax on distant selling in more detail, please do contact Michael Burgess or Rebecca Thorley on 01782 279615.