Distance Selling and VAT – Your Obligations

Distance Selling and VAT - Your ObligationsDo you sell goods to customers in Europe? If so, it is essential you understand the EU’s distance selling regulations. They were created by the European Union to make it easier for companies to trade with customers in other member states, while also providing protection for consumers.

There are a range of rules you have to be aware of, including details of the information you have to supply to customers when making a sale, but this blog focuses on your VAT obligations.

Accounting for VAT

The distance selling rules only apply to sales you make to customers who are not VAT registered. They apply to any type of sale, however, so include sales via your website, by phone, or by mail order.

When it comes to your VAT obligations, the distance selling rules set out where you have to account for VAT, i.e. here in Ireland or the country your customer comes from.

You have to account for VAT in Ireland so long as your total sales to customers in a particular EU country do not exceed the threshold that has been set for that country. If your total sales over a year do exceed the threshold for that country, you have to register and account for VAT there.

The threshold for each country in the EU varies, although most have the same threshold as Ireland – €35,000. This includes France, Spain, and Portugal. Countries not in the Euro have thresholds set in their own currency (for example, Denmark’s is 280,000 kroner), while other countries have set higher thresholds. This applies to countries like Germany (€100,000) and the Netherlands (€100,000). The UK’s threshold is GBP £70,000.

You can find a full list of thresholds that apply to EU countries on the European Union’s website.

Here are some examples of how the distance selling rules might affect your business:

  • Your business sells to a variety of customers in Spain, but the total value of those sales is €20,000. This is less than the €35,000 a year threshold that applies to Spain so you should account for VAT on those sales in Ireland.
  • Your sales in Spain increase to €45,000 a year, putting you over the threshold. The VAT on those sales must, therefore, be accounted for in Spain so you must be registered for VAT there.

To find out how to register for VAT in an EU country, and to learn more about its VAT rules, you should visit that country’s national tax website.

Distance Selling Tips

If you have significant levels of sales to customers in Europe, you should make sure you have systems in place to record the total value of sales in each country. You should also seek advice from your accountant on the best way forward, as well as making sure you take prompt action if you go over a country’s threshold.

For more help and advice with VAT, distance selling, or anything else in your business, please contact a member of the Gilroy Gannon team today.

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