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.
Antonia KlattLast Updated on 31 January 2022
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.
UPDATE: Starting from the 1st of June 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, the country specific limits below applied, now the EU-wide treshold of 100,000€ applies. 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 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.
Now, you need to register in all countries you are selling to from the beginning, as the revenue through sales to the Netherlands alone already exceed the EU-wide threshold of 10,000€
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 of digital goods 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.
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).