A lot of retailers are expanding into Europe because it’s a massive opportunity. A recent report identified that there are at least 296million shoppers in Europe and each shopper spends about $1800 each year. However, there are EU VAT rules and regulations that they need to follow.
Here are some useful tips from VATIT to consider when it comes to EU VAT tips.
1. EU VAT Rules Are Different In Each Country
Most people assume the EU is one single market. However, each country in the EU is responsible for its own VAT collection. That means that the 28 countries in the EU use different VAT rates, product rates and there are different methods of collecting and reporting VAT.
2. Amazon Can Help You Sell Products In The EU
Amazon has reached in 5 countries in the EU with at least 31 fulfillment centers in 7 countries. Therefore, they have access to a €500 billion market with a 12% growth rate every year. You can check out any of the 5 programs offered by Amazon to kick start your domination in the European market.
3. Upfront Payments For EU VAT On Inventory
You will be charged VAT at the first point of entry if your goods are above the threshold (a maximum of $20). You need to decide who will be liable for the import charges whether it’s you (the retailer) or the customer.
If you have exported anything from the US previously and haven’t experienced these charges before, the customer will most likely be addressed as the importer on record. Therefore, the customers will be charged with the EU VAT liabilities before the goods are actually delivered to them.
On the other hand, if you register for VAT voluntarily, you will become the importer on record (as the retailer). Therefore, the goods will be transferred to the customer with the duty fully paid and your customer will not be liable in this case. The cost of compliance with the EU VAT rules to become the importer of record has resulted in the loss of repeat customers.
4. You Need An EORI Number To Export Anything To Europe
The Economic Operator Registration And Identification (EORI) number is a unique number used in the EU to identify the importer to the EU customs authorities. The number will be used on the import documents to identify the importer on record for the customs authorities.
5. Any Inventory Stored In The EU Needs To Be VAT Registered
If any of your stock is stored in the EU, it is automatically registered for VAT. If you are using Amazon’s EFN service in one country in the EU, you will only need one VAT registration where your stock is being stored. However, if the stock is stored in multiple locations, you need to be registered for VAT in each country.
6. Legal Representation Is Required
For all the countries not in the EU, you should have fiscal representation if you are to register for VAT in certain countries. These include France, Poland, and Italy. Fiscal representatives are eligible for any VAT owed in the country of import. If you are working from a country, not in the EU, you need bank guarantors or you will pay higher fees. Therefore, opt to create a company in the EU if you want to avoid this.
7. Marketplaces Are Not Responsible For Your EU VAT
Marketplaces are not responsible for collecting tax from the customer. European governments are following up on this to make sure the tax is being collected. Tax authorities in the EU are actively pursuing retailers to determine the undeclared VAT and catch up with the lost revenue over the years.
If they follow up with the marketplaces and the liable VAT isn’t collected as expected, Amazon might shut down your store within 30 days. If you want to avoid a lot of headaches, you need to stay ahead of the game. By 2016, the UK decided to leave the EU and thus they lose their access to the single market.
Therefore, if you are planning to sell your goods in the UK, you need to plan for exportation in the same way as other countries such as China. You need UK VAT registration if you need to access the UK market especially when you are holding stock in UK FBA.
In conclusion, selling in the EU can be a huge opportunity for retail businesses everywhere in the world. However, you need to plan and prepare accordingly. Otherwise, you will incur hefty punishments. With regard to VAT, you need to follow the registration and permits used for the best results. If possible, hire an expert on VAT in the UK to make sure you have adhered to all the requirements effortlessly. Trading in the EU can make a lot of profit for you but you need to follow the rules.