Businesses selling to European Union consumers must ensure the correct rate of tax is declared following the introduction of new e-commerce VAT rule changes.
Those changes will see them taxed according to the local VAT rate applicable in each EU country.
And it means that businesses must ensure their websites and pricing structures comply with the new tax regime.
The changes came into force on July 1. Companies that sell to EU consumers and are responsible for delivering the goods need to make sure that the correct rate of VAT is declared on the sale.
That rate will be the rate of the consumer’s country. An as each EU nation will have different rates, experts are stressing that may require considerable changes to their websites.
According to The Institute of Chartered Accountants in England and Wales, businesses also need to ensure they are correctly registered within the EU. The new rules affect businesses that sell and are responsible for the delivery of goods to EU consumers.
For sales valued below €150 per transaction, businesses can choose to register for the EU’s Import One Stop Shop (IOSS) or register in each EU country in which they have a domestic customer.
The IOSS facilitates the collection, declaration and payment of VAT on behalf of UK sellers through a prior-appointed EU representative, if the seller has no current establishment in the EU itself.
The IOSS system also ensures that the supplier accounts for the correct amount of VAT at the time of purchase from within the gross amount paid.
Businesses selling B2C goods and services valued above €150 per transaction will be required to register for VAT in every EU member state where they make such sales.
To avoid liability for local VAT on the sale, businesses must change their terms of sale so that their customer is responsible for importing the goods into their country.
The customer will have to pay the import VAT and any customs duty, but businesses must make this clear to their customers at the point of sale.
Businesses could also opt to have their delivery provider pay the VAT and any duties at the point of import into the customer’s country and have the costs charged back to them.