E-Commerce and global VAT compliance

In this modern age, it’s no surprise that selling goods online is one of the fastest growing areas of retail. It’s a viable option for companies of all sizes and even independent sellers, whether it’s done through an independent website or an online marketplace. But what some businesses forget, as “1stopVAT” notes, is that there is a global VAT compliance with various obligations that they must adhere to when providing goods to customers all around the world.


Distance selling for EU-based retailers


For those that provide goods directly to European customers or store their products in another EU country, there is a requirement to charge and collect local VAT. This is where distance selling comes in place, as it simplifies the whole process, the administration burden and encourages free trade in the zone.


Businesses only need to apply for VAT in those countries, in which they exceed the “VAT Registration Threshold”. As “1stopVAT” notes, to act in accordance with the global VAT compliance rules, e-commerce companies should monitor their revenue thresholds.


Non-EU retailers selling to Europe


Foreign companies also selling their goods and services online to customers in Europe are also required to charge and collect local sales taxes. Though in this case, it depends on certain conditions. If a business is exporting products for direct sale, distribution or is selling through Amazon, then they must register for VAT in at least one European country.


Here, the aforementioned revenue thresholds must also be monitored in the countries that business is conducted in. As “1stopVAT” emphasizes, it’s important to understand these rules and obligations prior to setting up an e-commerce website to ensure that everything adheres to global VAT compliance.


For new companies that want to provide goods all around the world, it’s crucial to understand the obligations that they have in each country when it comes to VAT. If done correctly from the start, they’ll avoid any issues and liabilities when filling VAT returns and such.