What is Distance Selling?
Distance Selling means sales that are purchased not face-to-face but mostly sold online via online mail orders services. As you might know, VAT registrations are necessary either when you set up a business, store your goods in a European warehouse and, and that’s often forgotten, when you reach the annual threshold limit of a country.
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Threshold Limit – Distance Selling – VAT
Distance selling cause VAT duties in Europe. Every European country has its own distance selling threshold. Once this limit is reached within a calendar year, the seller has to get an additional VAT number in the country of import.
Due to the fact that the VAT is a tax which has to be paid by the final consumer, countries will expect businesses to register with them in order to make these businesses pay the local VAT.
Keep in mind: For electronic or digital services to consumers there are no distance selling thresholds.
The main idea behind these “VAT registration thresholds” was to reduce the bureaucratic expenditure for companies and to encourage them to grow and to expand to other European countries.
Distance Selling Regulations in Europe
There are many rules and regulations for distance selling in Europe. Knowing the duties is crucial to be on the safe side when it comes to taxation and VAT. The Distance Selling Regulations (DSRs) apply for all distance sales. The purpose of the DSRs is the protection of the consumer in Europe.
List of Regulations
Here is a brief list of regulations that apply for distance selling and what you need to provide to the customer:
- clear information about the goods or services before the purchase (Pre-Purchase Information)
- written information after the products/services were purchased
- the right to cancel orders within 7 days
- the right to have goods or services provided within 30 days after the order was sent (unless otherwise agreed)
- refund in case that products aren’t delivered on the agreed delivery date
- the right to a refund if payment was not authorized
You must also comply with the Consumer Rights Act 2015. When getting consumers personal information, you must also comply with the Data Protection Act 1998.
- Business Name, Contact Address and E-mail Address
- Telephone Number (state the costs of calling the number if above standard rates)
- Limited Companies
- VAT Number (if applicable)
- Description of Goods/Services
- Terms & Conditions
- Contract period (if applicable)
- Selling price (including taxes)
- Sales Offers
- Delivery Costs
- Payment methods accepted
- Cancellation Information
- Substitute Goods
As many sellers want to offer their products on different channels, here is a brief list of all trading channels that are regarded as channels for distance selling:
- Website & Online Shop
- TV & Telesales
- Online Marketplaces like Amazon
- Online auction platforms like eBay
Distance Selling exceptions for B2C and B2B
Distance Selling Exception B2C
Not selling among the limit of 10,000 € in cross-border sales within one calendar year means that the local VAT rate (the VAT rate of your homecountry) applies for those sales.
As soon as you exceed this limit, the VAT rate of the country of import is charged. So before reaching the annual threshold limit that makes an additional VAT registration mandatory, there is also a limit that changes which VAT rate applies!
Distance Selling Exception B2B
Briefly speaking: When it comes to B2B sales via distance selling, the VAT rate of the country of import applies.
Find out more in the Distance Selling Directive of the European Commission.