Anyone selling on marketplaces will know that the beauty of marketplaces is that their capabilities are limitless.
It’s a fantastic way for brands of any type and size to reach a new community of customers – enabling you to expand your sales worldwide without the extensive costs of setting up a brick-and-mortar store.
Being able to sell globally is wonderful, but it does come with certain accounting challenges that, without the right systems, can be extremely time-consuming to manage.
We’ve encountered first-hand how many hours can go into exporting and manipulating our marketplace transactions – and we’re here to tell you that there is an easier way.
The basics of international selling
First off, it’s important to note that we aren’t qualified tax advisors, and all of the information provided here is intended to be taken as general guidance, For advice specific to your situation, it’s best to consult a qualified tax advisor.
That said, let’s get to the point:
Everyone selling goods on European marketplaces is obliged to pay VAT.
The amount of VAT that you are liable to pay (and which country you need to pay VAT to) varies according to a range of factors. The three primary factors for sellers based in the EU are:
- The country(s) where your goods are stored or shipped.
- How much you are selling in each country.
- Applicable VAT rates in the countries which you are registered for VAT.
VAT rates range from 8%-27% depending on which country you are in. You can find a complete tax table with rates and links to official sites here.
To begin with, you are required to be registered for VAT in your home country, and any other countries in which you store inventory.
Once your revenue to any given EU country is above the pan-EU threshold of €10,000, you are required to register for VAT, and pay VAT on any applicable sales to consumers in that country.
For cross-border EU business transactions, VAT is paid by the receiving party. If your combined sales to consumers in any given EU country is below the threshold, you must pay VAT on these sales to your home country at the local rate.
The rules are different for sellers based outside of the EU - you will need to get an EORI (Economic Operations Registration and Identification) number that identifies you as the importer.
Importers must pay VAT at the first port of entry, which can be later reclaimed via a VAT return.
The 2021 Ecommerce VAT package
The rules around VAT changes on July 1, 2021.
There were five key changes to impact e-commerce sellers:
- The pan-EU distance-selling threshold. Each EU member state used to have its own threshold to qualify for paying VAT there. Now, they all have the same €10,000 revenue threshold.
- A One-Stop Shop (OSS) centralized filing system. Now sellers that need to remit VAT to more than one EU member state can do so in one place. One process, one filing, and one amount.
- An Import One-Stop Shop (IOSS) centralized customs system. For low-value consignments (under €150), sellers can manage their customs and import duties in one place for a quicker, smoother transaction. Customers get a more transparent experience and faster deliveries.
- The Low-Value Consignment Relief (LVCR) is no more. All products are subject to VAT.
- The marketplace facilitators, like Amazon, have new responsibilities. Amazon may, in fact, collect and remit your VAT for you, depending on your unique circumstances.
How Meezy handles VAT for you
When it comes time to file your taxes, you’ll need to know exactly what you have collected. Meezy builds a real-time dashboard that calculates this all for you automatically, giving you a time-saving head start at the end of the financial year - wherever you do business.
Want to know more about how we do this and what else you can find in our data dashboard?
Book a free consultation with us.⬇️