Online selling and mail order services are increasing ever since. People all over Europe order millions of packages every day on Amazon and of course many of these orders are transborder sales. As a seller, these distance sales can lead too tax duties when selling in Europe.
What is Distance Selling?
Besides other factors that lead to the obligations to register for VAT, like founding a business or storing within a country, reach the annual threshold limit for distance selling can also make a VAT registration due.
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Distance Selling Threshold Limits in Europe
Selling from the country you are VAT registered in is fine until you reach the limit below within one calendar year. At this point, you will need to register for VAT in this country.
Reaching the annual threshold limit for distance selling leads to various VAT duties. That’s why reaching this limit should not be missed to avoid problems (and penalties) before they even happen.
Example for Distance Selling from UK
You are an online seller based in the UK and sell to several European countries. The products you sell online to Germany are worth 50 000€. No problem.
As soon as the annual threshold is 100 000€ you need to register for VAT in Germany. The annual VAT threshold limit for Germany is 100 000 EUR. Once this limit is reached, a VAT registration and continuing returns are required.
Distance Selling exceptions for B2C and B2B in the EU
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.