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To stay tax compliant is always one of the most important things for online businesses. To ensure compliance, getting a VAT Identification Number is usually one of the first steps and there are several reasons that require having this number, one reason is reaching the annual distance selling threshold limit. This article shows you what the threshold limit is all about and when you need to register for VAT
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What is VAT?
The value-added tax is assessed on the value that is added to goods and services bought and sold in the EU. It applies to all commercial activities involving the production and distribution of goods and the provision of services. It’s a so-called consumption tax as it needs to be paid by the consumer and not by the producer.
Each and every European country has its own VAT rates and for different product categories, there are also different rates that can apply.
Check out our articles about all VAT rates in Europe, or speficially in Amazon’s European main marketplaces: Germany, the UK, France, Italy and Spain. and how hellotax offers a perfect solution when it comes to registering for VAT: the digital registration process.
Are all sales liable to VAT?
Briefly speaking: no. There are some sellers that are not registered for VAT because the turnover is too low, however, FBA sellers for example have to be registered anyways as storing in and selling from a country are also reason that make having a VAT Identification Number obligatory.
How to calculate your prices
By keeping in mind that every country can set its own rate and by taking a look at the graphic below, setting the prices right and calculating with VAT shouldn’t be too difficult, it’s not rocket science.
You can also use Amazon’s VAT Calculation Service.
When to register for VAT?
There are several reasons that lead to the need of a VAT registration. If you are storing in and selling from a European country or setting up a business in a country, you need to register for VAT and take care of filings and returns.
However, there is a third reason that legally obliges you to apply for a VAT Identification Number in a foreign country: reaching the annual threshold limit for distance selling.
If you are selling abroad via distance selling in Europe, the VAT number of the country of residence of your business is used as long as you don’t reach the annual threshold limit of a country of import.
Expecting a VAT-taxable turnover exceeding the threshold limit within a 30-day period also leads to the obligation of a VAT registration!
What is a VAT registration threshold?
The VAT registration threshold is a limit value, different in all European countries, and sellers need to register for VAT in the country they are selling to when when this limit is reached. So distance selling, e.g. via online mail orders, or rather the turnover of the distance sales, is something that needs to be monitored.
To sum it up, it’s a limit whose exceeding leads to tax obligations and duties, and the turnover is what counts.
The turnover is decisive
The thresholds are clearly defined, and the turnover is the number that can reach the limit. But in some cases, there is a way to at least reduce the actual turnover a little bit. The VAT born on stock that was purchased for resale is the amount by which you may reduce the value of the turnover.
This can make sense if the amount of incurred VAT reduces your turnover to a level which is below the annual threshold limit.
Which VAT thresholds are there in Europe?
Here is a short overview of the annual threshold limits of the big Amazon marketplaces in Europe followed by an example.
| Country | Threshold Limit |
| Germany | € 100,000 |
| United Kingdom | £ 70,000 |
| France | € 35,000 |
| Spain | € 35,000 |
| Ialy | € 35,000 |
| Poland | PLN 160,000 |
| Czech Republic | CZK 1,140,000 |
Example:
A seller based in the UK sells to various countries in Europe and the products he has sold to Germany within the first year had a total value of € 50,000. That means the threshold limit wasn’t reached and no actions are required as the annual threshold limit for distance sales to Germany is € 100 000. As soon as this limit is reached, or 100 000. As soon as this limit is reached (or preferably shortly before), you need to register for VAT
Naturally, all countries in Europe have their own threshold limits and the popularity of an article can vary. It often depends on the market of the country, the climate, the trends – the people in general. Therefore, here a list of threshold limits in Europe.
| Austria | € 35,000 |
| Belgium | € 35,000 |
| Bulgaria | BGN 70,000 |
| Croatia | HRK 270,000 |
| Cyprus | € 35,000 |
| Czech Republic | CZK 1,140,000 |
| Denmark | DKK 280,000 |
| Estonia | € 35,000 |
| Finland | € 35,000 |
| France | € 35,000 |
| Germany | € 100,000 |
| Greece | € 35,000 |
| Hungary | HUF 8,800,000 |
| Ireland | € 35,000 |
| Italy | € 35,000 |
| Latvia | € 35,000 |
| Lithuania | € 35,000 |
| Luxembourg | € 100,000 |
| Malta | € 35,000 |
| Netherlands | € 100,000 |
| Poland | PLN 160,000 |
| Portugal | € 35,000 |
| Romania | RON 118,000 |
| Slovakia | € 35,000 |
| Slovenia | € 35,000 |
| Spain | € 35,000 |
| Sweden | SEK 320,000 |
| United Kingdom | £ 70,000 |
Summary: VAT threshold limits in Europe
Keeping an eye on threshold limits when your sales numbers to a specific country are rather high is definitely recommended to make sure to avoid penalties and unnecessary paperwork.
When you act in time, the one-time processes can be ticked off rather quickly, but VAT registrations always mean future duties like regular filings and returns.
The hellotax vat automation software, the digital registration process and our team of local tax accountants ensure a proper handling of the all processes involved and to get back to the VAT threshold limits, you can monitor all current sales, goods movements and how far you are ways from reaching threshold limits in the countries you are selling to directly in our software.
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