VAT – what you should know when selling online

  • Last update: 08.07.2024
  • Published: 05.08.2020
  • Read in: 5 min

VAT, VAT Registration, and VAT Settlements
VAT tax, VAT registration, and VAT settlements pose significant challenges for online sellers operating within the European Union. Differences in VAT rates depending on the country, variations due to product type, VAT registration thresholds, issuing VAT invoices, distance selling thresholds, and the origin of the shipment can seriously discourage sellers from scaling their operations.

VAT – what you should know when selling online

VAT (Value Added Tax) – What is tt?

VAT, or Value Added Tax, is a consumption tax. It is levied on almost all goods and services purchased and sold for consumption and use within the European Union. Its value is added to the net value of all commercial transactions. VAT is applied regardless of whether the transaction occurs between individual customers or businesses, both when importing and when shipping goods within the European Union.

Calculating the appropriate VAT Rate, Intra-Community Supply/Acquisition

If your company is registered in the European Union, your VAT obligations depend on the market where you sell your goods and what those goods are. Assuming you are an EU VAT payer and you sell products to a company that is an active EU VAT payer registered in a different EU country than where you are registered, you do not charge VAT on that sale – this is known as intra-community supply or acquisition of goods (ICS/ICA), more about which you can learn from our article What is an Intra-Community Supply of Goods (ICS)?.

But! If you sell the same product to an end consumer in the European Union, you apply the VAT rate of the country from which the goods are shipped, and after exceeding the distance selling threshold, the VAT rate of the destination country applies.

If needed, check the applicable VAT rates in Europe 2024 and what exactly are the EU mail order sales limits in 2024.

Pretty complicated, right? So the question arises – when do you need to register as a VAT payer in the country of delivery?

VAT Registration – What does it mean?

What is VAT registration? This concept is often associated with setting up a company in the country where we want to sell our goods, or with creating a branch registered in that country. And nothing could be further from the truth!

A company that registers for VAT in various EU countries does so to reclaim the VAT paid there and to charge VAT on sales to customers buying from that country. Through this registration, the company gains the status of NETP (Non-Established Taxable Person), meaning it does not pay income taxes in the country where it is solely VAT registered, provided the company does not have a permanent establishment there.

However, it should be noted that not only sales in another country require a local VAT number. If you want to learn more, check our article – When is VAT registration in a foreign country required for online sales?.

VAT and the EU VAT number

In the context of VAT, we also talk about the EU VAT number, which can be called the European VAT number. It allows for intra-community transactions – ICS and ICA, as mentioned earlier – and is essential for businesses to operate in the European market according to legal requirements.

If you want to read about who is required to have an EU VAT number or what obligations an EU VAT taxpayer has, you will find this information in our article How do I obtain an EU VAT number?.

How does EU VAT registration relate to selling on Amazon?

Apart from exceeding the mentioned sales threshold, Amazon strictly enforces VAT registration in the country where its warehouse storing your goods is located. Therefore, the obligation to register for VAT in another EU country arises when selling through the Amazon FBA model, i.e., when goods are stored in a foreign warehouse. The location of your goods affects VAT obligations. Registration should be done, of course, before starting sales from a given foreign warehouse, regardless of the previous value of product sales.

VAT – What you need to know when selling online – Summary

Selling on the pan-European market and the related VAT rules can be extremely complicated, and one article cannot cover this topic entirely. With so many variables, VAT rate differences, the number of parties in transactions, etc., it is very easy to get lost in VAT EU settlements. On the other hand, Amazon tempts with the possibility of conquering many markets simultaneously, even through the FBA model.

Taxology facilitates the VAT registration process and subsequent VAT EU settlements. We keep our finger on the pulse and stay up-to-date with all changes occurring in European markets. So, if you are still hesitant and unsure whether it is worth registering your company for VAT EU, schedule a consultation. We will certainly dispel your doubts and help you avoid problems related to selling in international markets in the future. Schedule a consultation today and let us handle your taxes while you focus on growing your business.

How to register for an EU VAT number?

Tomasz Połeć Tomasz is a co-founder of Taxology and a tax advisor (license No. 12104), with 15+ years of experience in Polish and international consulting firms. Leveraging his expertise from numerous tax reviews and audits, he offers proficient tax advisory services to e-commerce companies. He specializes in advising on VAT and CIT settlements in e-commerce and logistics.