VAT by ASD Group
In the context of Business to Consumers commercial transactions, all distance sellers proceeding to trading of goods within the European Union (EU) must comply with Value Added Tax (VAT) regulations relating to E-commerce.
3 conditions must be met in order to fall under the Distance Sales VAT regime:
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Goods must be shipped or transported by the distance seller or on his behalf to the buyer’s destination
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Goods must be shipped from one EU Member State to another EU Member State
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Buyer must be a private individual or a person covered by an exemption scheme
The Distance Sales VAT regime is applicable to trading of goods occurring on EU territory and it determines the location of taxation depending on the E-commerce turnover threshold.
This threshold varies across Member States. Each State independently determines its own threshold.
Here are the current thresholds in force in the various Member States :
Operational Principle and calculation method of E-commerce Threshold:
Each Member State sets its own “E-commerce Threshold” (between €35 000 and €100 000). To calculate the threshold, you simply need your revenue excluding taxes in the destination State over one calendar year.
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If the value of the sales destined to a Member State are equal or less than the threshold set by said State, you invoice the VAT of your country of origin.
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If the value of the sales destined to a Member State are above the set threshold of that State, you do not invoice VAT of your own country but you invoice the VAT of the destination country after having registered for VAT with the local fiscal authorities.
When you exceed the threshold for distance selling, you owe VAT in the country of destination, which forces you to register for VAT in the country, to invoice local VAT and submit VAT declarations to local fiscal authorities. To register, you can appoint a specialised tax advisor. ASD Group, an international taxation firm, assists distance sellers in these complex administrative procedures. For more information on how to obtain an Intracommunity VAT number in another EU Member State, visit this page
Important notes:
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The distance seller can choose, on a voluntary basis, to register for VAT in the destination State before having reached the threshold. He is required to notify the fiscal services of his country of establishment beforehand.
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The regime for distance sales does not apply to intra-community deliveries concerning means of transport (new or second-hand), or to products subject to excise duties (alcohols, alcoholic beverages, mineral oils, manufactured tobacco)
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Deliveries occurring in the context of trading with third party territories are excluded from the Distance Sales Regime.
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Given that each Member State applies its own regulation, and that certain goods are subject to different regulations, it is highly recommended to check the VAT rates in force in the country of destination. Visit this page to check the different VAT rates for each Member State.
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Customs declarations called Intrastat must also be taken into account when thresholds are exceeded. To find out more on Intrastat declarations, please read this article.
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When the threshold is exceeded, the company has 30 days to register in the country of destination.
Case Study
The German company Frisk sells ready-made clothing in France, exclusively to private individuals.
In 2015, the company had a turnover of €20 000 excluding VAT in France. All sales invoices concerning French customers charged the German VAT rate of 19%. This VAT was reported monthly on the German Fiscal Declaration.
Between Jan 1st 2016 and April 1st 2016, sales in France highly increased and the company had a turnover of €35 001. The French VAT threshold being exceeded, Frisk registered for French VAT and obtained a FR intracommunity VAT number. (This process can be done directly with French fiscal authorities or through the service of a French fiscal representative.)
Obtaining a French VAT number allowed Frisk to invoice their French customers charging local VAT (20%), and to return the collected VAT to French tax authorities by declaring it on their French VAT declaration.
Why choose ASD Group
ASD Group is an international taxation firm specialised in Fiscal and Tax representation. For the past 20 years we have assisted our distance-sales clients in the management of their VAT and Intrastat declarative obligations. Through our linked network of agencies spread over 24 countries, we can manage your intracommunity VAT in all the EU Member States. For more information on our services, visit our website or contact one of our sales advisor.
A video is worth a thousand words
Understanding Distance Sales VAT Regime in 2 minutes