Clamping down on lost VAT on international ecommerce sales

Whether you're selling online via Amazon, Ebay or your own e-commerce site you must be compliant with the VAT regulations of the respective destination country.

A clamp down on non-compliant e-commerce sellers

VAT is becoming a big issue for e-retailers across the globe. If you sell online, you need to understand which international tax laws will be relevant to your business. Whether you are selling goods to private consumers or buyers in European countries, you still need to be aware of the rules and rates of VAT. N.B, The rate of VAT changes depending on which country you are selling into. It can range from 17-27%. It is predicted that new tax legislation could recover around €5bn (£4.28bn) in lost VAT each year by clamping down on online marketplaces.

Changes to the EU VAT Distance Selling thresholds – 1st January 2021

The VAT ecommerce package is a series of measures which became applicable from 1st January 2021. The aim is to simplify the VAT rules for online sellers. They are based upon the 2015 VAT-MOSS (Mini-One-Stop-Shop) was introduced to facilitate the sales of digital services to private consumers within the EU.

The VAT-MOSS rules stipulate that if you sell goods to private customers located in the EU, local VAT must be accounted for based on where the customer is located, once you have exceeded a threshold of €10,000.

Under the new laws, online marketplaces will be made liable for the collection of VAT on sales to EU customers. This includes new responsibilities such as recording sales made to help national authorities calculate how much VAT is due, even when sellers from outside the EU have not complied.

Currently, goods imported from non-EU countries with a value lower than €22 are VAT-exempt. This leaves EU businesses at a disadvantage, since the cost of their products will always be higher for a local consumer. So, from 1 July 2021, this exemption will be off the books to ensure a level-playing field for all.

The calculation of duties

The calculation of duties depends on the assessable value of a dutiable shipment. For the purpose of this calculation, dutiable goods are given a classification code that is known as the Harmonized System code. It is used by customs authorities around the world to identify products when assessing duties and taxes.

Are you a UK business and want a better understanding'

The Spatial Global team are experts in cross-border e-commerce and will be happy to advise if your business trade is in excess of £80,000 p.a. as this is the UK VAT threshold.