Online selling and mail order services have been 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, distance selling in Europe may result in tax duties. In this article, we will explain everything you need to know about Distance Selling in Europe.
Antonia Klatt
Last Updated on 31 January 2022
What is Distance Selling in Europe?
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.
UPDATE: Starting from the 1st of July 2021 a Europe-wide unform delivery treshold of 10,000€ was introduced and replaced the previous country-specific thresholds. This had several consequences for online retailers. The new threshold can be reached by cross-border transactions into several countries, for example by sales from Germany to Spain worth 5,000€, to France worth 5,000€, and to Poland worth 1,000€. In that case, additional VAT registrations are required in all three countries and all sales after the crossing of the threshold are subject to the country-specific VAT rates. This legislation change was introduced with the launch of the One-Stop-Shop.
Distance Selling Threshold Limits in Europe
Selling from the country you are VAT registered in is fine until you reach the threshold within one calendar year. Previously, country-specific thresholds applied. Since 1 July 2021, a single EU-wide threshold of €10,000 applies for distance sales under the OSS scheme. Additionally, from 1 January 2025, an optional SME VAT exemption scheme introduces a €100,000 threshold for eligible small enterprises.
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 Germany
You are an online seller based in Germany and sell to several European countries. The products you sell online to the Netherlands are worth 50 000€. This was previously not a problem.
As soon as the annual threshold was 100 000€ you needed to register for VAT in Germany. The annual VAT threshold limit for Germany was 100 000 EUR ad once this limit was reached, a VAT registration and continuing returns were required.
If your total cross-border sales within the EU exceed €10,000, you must charge VAT based on the customer’s location. To simplify compliance, you can register for the OSS, enabling you to report and pay VAT for all EU sales through a single registration in your home country.
Distance Selling exceptions for B2C and B2B in the EU
Distance Selling Exception B2C: If your total cross-border B2C sales of goods and certain services within the EU remain below €10,000 in a calendar year, you may apply the VAT rate of your home country to those sales. Once this threshold is exceeded, you must apply the VAT rate of the customer’s country.
Distance Selling Exception B2B: briefly speaking, when it comes to B2B sales via distance selling, the VAT rate of the country of import applies and there are no registration thresholds (as businesses are registered for VAT and the VAT payment is clear anyways).
Additional Updates
SME VAT Exemption Scheme (Effective 1 January 2025):
An optional SME VAT exemption scheme allows small enterprises with annual cross-border sales not exceeding €100,000 to benefit from VAT exemptions in other EU Member States, provided certain conditions are met, including obtaining a special ‘EX’ VAT identification number and submitting quarterly reports.
Import One-Stop Shop (IOSS):
For distance sales of goods imported from third countries with a value not exceeding €150, the IOSS allows sellers to collect VAT at the point of sale and remit it through a single monthly return, simplifying the import process for both sellers and customers.
