The Sellers Guide to VAT. Essential Tips for Sellers Entering European Markets

Transcription

1 The Sellers Guide to VAT Essential Tips for Sellers Entering European Markets 1

2 Table of Contents WHAT IS VAT 3 DOES VAT COLLECTION APPLY TO ME? 3 NON-EU BUSINESSES SELLING GOODS INTO EUROPE 5 EU-BASED BUSINESSES SELLING GOODS WITHIN EUROPE 9 RECLAIMING IMPORT TAXES 11 FISCAL REPRESENTATIVES 13 HOW TO PAY YOUR VAT FOR FREE WITH PAYONEER 14 IMPORTANT VAT CONSIDERATIONS BY COUNTRY UK Germany France Spain Italy Poland Czech Republic 17 GLOSSARY OF TERMS 26 2

3 What is VAT? VAT stands for Value Added Tax which is an excise tax based on the value added to a product at each stage of production or distribution from the raw material to the manufacturer, to the wholesaler and so on. VAT is favoured in over 140 countries worldwide. In all 28-member states in the European Union the EU VAT directive applies VAT is not supposed to be a burden on businesses when VAT registered. The VAT collected on sales is offset against VAT paid so long as you are VAT registered. The burden of VAT is with the final customer which is revenue the tax authorities do not have to pay back. + VAT + VAT + VAT + VAT We know that you want to sell in new markets and expand your business without worrying about local rules and regulations, especially international taxation. But Value Added Tax (VAT) has become a concern for those selling to the UK and EU markets, and for good reason. With recent crackdowns on foreign sellers selling on EU marketplaces, ecommerce sellers outside of Europe need to familiarize themselves with VAT laws and policies. Does VAT collection apply to me? If you are a seller with an incorporated entity outside Europe (a Non-Established Taxable Person, NETP), you must register for VAT. If your company is established within the EU, you ll have set thresholds for the country you re established in before requiring a local VAT registration. Holding stock within an EU country triggers an automatic obligation to VAT register. This is because your stock becomes a taxable supply once in the EU country. If your company is not based where your stock is being held, there is an immediate requirement to register in that specific country. If you re using a Fulfilment By Amazon (FBA) program: VAT registration is mandatory. Sellers residing outside of Europe must register for VAT before entering a European marketplace. The time of processing VAT registration varies from country to country and can take from between 14 days to 10 weeks to register for VAT. 3

4 After you receive your VAT number, you must add it to your Seller Central Account along with the address under which your VAT number was registered. If you choose to store your products in any one of the seven countries of Amazon s Pan-European fulfilment program, you will be required to register for VAT and file the correct VAT returns and reports in the respective countries where you are registered. Once your products are stored in one of Amazon s European marketplaces, sales can be to VAT Tip 1 Make sure you understand where your stock is being held! Holding your stock triggers an obligation to VAT register. If you are using Amazon FBA check your seller central to confirm where you wish to hold your stock and be prepared to have a VAT registration in place. If you need help understanding where Amazon is holding your stock, we re here to help! 4

5 Non-Eu Businesses Selling Goods Into Europe For businesses outside the EU selling into Europe, the responsibility for taxes and duties depends on who is the importer of record. Who is the importer of record? When drop shipping from outside the EU, to a customer inside the EU, it is usually the consumer who will be asked to pay the import charges and VAT, via the parcel carrier, before the goods will be delivered. This is often not a pleasant customer experience, especially if it is unexpected. The additional import costs may even negate the benefits of buying abroad, and can result in a high number of returns from disgruntled customers. 5

6 To avoid this, you may want to consider registering for VAT in the first port of entry into the EU for your goods, for example, in the UK. By keeping ownership of the goods, you will be the importer of record, and VAT will be charged on the cost price of the goods on entry. The import VAT you pay is reclaimable on your VAT return, and the customer pays the full price at checkout including VAT so there are no nasty surprises for them. You will also benefit from a reduction in the number of returns. Where is your stock held? You may decide you want to house your stock in a fulfillment center or warehouse in an EU member state, in order to fulfill your European orders more cheaply and efficiently. Be aware as the stock is now held within the EU, and is still owned by you, this has created a taxable supply and raises the immediate need for a VAT registration. There is no threshold to exceed. If you decide to use a distributor or agent, the same VAT liability may not apply it will depend on your contract with them and who has ownership of the goods. To find out check your contract and speak to an expert. On a positive note, once you have registered in the UK or another EU member state, you become governed by the VAT distance selling rules the same rules which apply to EU businesses selling within the EU. Distance selling If you are holding your stock in one EU country and selling directly to private consumers in another EU country, you are covered under the distance selling rules. These rules state that as long as your net sales totals (not including VAT) are below the distance selling threshold of a given European country within a calendar year, you can declare your distance sales in the country of departure of the product. You will include the VAT registered country s VAT rate until the set thresholds are exceeded. Country Thresholds Threshold Equivalent to approx. Most EU countries 35,000 $36,000 Germany, Netherlands, Luxembourg 100,000 $105,000 UK 70,000 $85,000 6

7 For example, if you registered for VAT in the UK and you are distance-selling in Germany, France, Spain and Italy, you can declare sales of up to 100,000 for Germany and up to 35,000, each, for the other countries in your quarterly UK VAT return. Once the distance selling threshold has been reached in a particular country, all online sellers are required to register for VAT in the country where you exceeded the threshold. This applies to the cumulative sales totals on any marketplaces on which you're selling - Amazon, Wish, Shopify, C-Discount, and others. The procedures associated with VAT include charging local VAT rates, filing relevant documentation and submitting VAT returns on time in each country where you are VAT registered. VAT Tip 2 Distance Selling thresholds are calculated on the cumulative sales from one EU country to another. Each threshold will include sales from multiple sales channels and marketplaces. If you are selling medium to high value goods, it could be quite easy to cross over the threshold. Not sure if yzou ve hit the threshold? Use the SVAT solution to monitor your distance selling thresholds across multiple marketplaces. Obtaining an EORI number and Filing VAT Returns Before shipping your products to Europe, you will need to apply for a European Operator Registration Identifier (EORI) Number, along with your VAT number. The EORI number, which is linked to your VAT number, allows European customs officials to identify your shipments and issue the respective documentation. This enables you to reclaim the import VAT that was paid at customs. Both the VAT and EORI numbers must be used when making a shipment to Europe, so make sure that your freight forwarder includes both numbers in your bill of lading. Equipped with this information, your accountant or agent in the country of registration will be able to receive the C79 import documents issued from HMRC and claim the import VAT that was paid at the port of entry (in the UK, import certificate C79 is necessary). 7

8 Import documents in other EU countries are called SAD documents and will be given to the importer to then give to their tax agent. Once you have registered for VAT in a European country, you must file VAT returns according to the local requirements. If you fail to file VAT returns, you are liable to face severe penalties imposed by local tax authorities. Each country has different filing deadlines and you need to work closely with your accountant or tax agent to make sure that VAT is paid on time. VAT Tip 3 An understanding of VAT rates per category is essential for sellers. VAT is included in a product s retail price listed on the marketplace. Sellers who underestimate the VAT due for a product may find their profit margins unexpectedly and unpleasantly impacted. 8

9 Eu-Based Businesses Selling Goods Within Europe If you are based in Europe, and sell to consumers within the EU, the distance selling rules also apply to you. The rules apply even if: You are not VAT-registered You are a sole trader. You are only selling through marketplaces such as ebay and Amazon the marketplaces do not take responsibility for VAT at all. 9

10 The rules only apply when you are selling to EU consumers. For sales within the EU, if you have not exceeded the threshold for the buyer s country, you should apply your domestic rate of VAT to those sales if you are VAT registered. Otherwise no VAT should be applied. Once you have exceeded the threshold for another EU member state, you will have to register for VAT in the inbound country, charge the country s own rate of VAT, and file returns according to the frequency and deadlines set by that country. You will stay registered as long as you continue selling. If your sales drop and you want to de-register, check the rules in that country how soon you can de-register varies. Selling to Non-EU Customers If you are selling to consumers outside the EU, the sale of goods is usually zero-rated provided strict rules are followed, including providing evidence of the export within three months of the sale. 10

11 Reclaiming Import Taxes Purchasing from within the EU Goods purchased from within the EU will be considered a B2B sale, except for domestic purchases in the country where your business is established, in which case the transaction will be treated as B2C with the applicable VAT Rate applied to the purchase. If the goods were purchased and then stored within the same country, you will give your VAT number to the supplier to place on the invoice. Depending on the country, the VAT will be treated as standard rated which can be reclaimed on the VAT return or it will be treated as a domestic reverse charge and will be charged without VAT. 11

12 If goods were purchased from a different country to where you are holding your stock for onward sale, you will give your VAT number to the supplier to place on the invoice. This sale is then covered under the reverse charge mechanism and will be charged without VAT. (if VAT Registered in Country A, purchasing from Country B and supplier in Country B is sending the goods on your behalf to Country C you will need a VAT Registration in Country B). Imports from outside of the EU When importing stock from outside the EU, you will be charged import VAT and duties at the port of entry. The duties are calculated on your commodity codes and are not reclaimable. The import VAT is charged on the landed value of your goods. Import VAT can be reclaimed on your VAT return as long as you have the appropriate documentation: a C79 for the UK or a SAD document for the rest of Europe. The import VAT is offset against the sales VAT collected so you may not actually receive a reclaim as it will be deducted from the amount you will pay to the tax authorities. What is a SAD document? The Single Administrative Document (SAD) details your goods and their movement around the world. It is 54 boxes and comes in 8 parts. Most SAD documents are completed online. The UK has their own version of a SAD called a C79. All imports into the EU will have a C79 or SAD alongside their shipment. Import VAT Charged = % Cost Value Freight Duties Insurance 12

13 Fiscal Representatives For non-eu based businesses wishing to VAT register in certain EU countries, you will be required to use a fiscal representative. Fiscal representatives are jointly and severely liable for the VAT owed by a non-eu based company. By using a fiscal representative, you may receive extra fees or require bank guarantees in order to cover the risk and liability involved. Countries such as France, Italy, Spain and Poland require fiscal representatives so may need careful consideration of the market before investing in the expansion. The UK and Germany do not require fiscal representation and therefore are great places to start your European expansion as a non-eu based business. 13

14 How To Pay Your VAT For Free With Payoneer VAT payments must be made to each European government in their local currency. For example, the UK government demands that VAT payments be made in GBP to the relevant account while the German government requires that payments be made in EUR. It may seem straightforward, however, if you are a seller located in the US or China and are selling in the UK and Europe, you may end up paying as much as 5% of your GBP or EUR income in fees just to pay VAT! 14

15 Payoneer offers global sellers the ability to make VAT payments in the EU and UK with EUR and GBP funds from their Payoneer account, with ZERO fees on the exchange rate and transfer fees. Without Using Payoneer s VAT Payment Service Using Payoneer s VAT Payment Service Pay a fee when withdrawing funds to bank account Pay a fee when converting funds to currency as required by VAT authorities Pay a fee when wiring the VAT payment Skip the fee by not withdrawing funds to your bank account Skip the fee for converting funds into the currency required by VAT authorities Skip the fee by paying VAT for FREE from your Payoneer balance Why Pay Your VAT with Payoneer? It s FREE - You pay no transfer fees Faster Delivery - Your VAT payment will reach the VAT authority or your fiscal representative in as little as 1 business day Easy to Pay in the Currency You Need - Use our Manage Currencies service to pay your VAT in the required currency (GBP or EUR). Collect Your Refunds - Receive your VAT refunds directly to your Payoneer account for free! 15

16 이용방법 : Receive Money In Gbp / Eur From marketplace sales on sites like Amazon.co.uk or Amazon.de Receive Money in GPB/EUR Receive funds from marketplace sales on sites like Amazon.co.uk or Amazon.de to your Payoneer account, no need to convert currencies. The service itself is free. Gbp / Eur Transferred To Your Payoneer Account Select Country to Pay VAT Choose the country to pay the required VAT to the right VAT authority in the right currency Send Funds Directly To Vat Collection Accounts Make a direct payment from your Payoneer GBP / EUR account to the GBP / EUR VAT government account Send Funds Directly to VAT Collection Accounts No need to wire funds internationally, which can incur fees and take up to 15 business days, and no need to deal with banks or international paperwork. WANT TO GET STARTED? It s easy. Just click here, select the country to pay VAT to and fill out the form. Payoneer will process the payment and inform you when the payment process on our platform is complete. Pay Your VAT with Payoneer 16

17 Important VAT Considerations By Country There are various factors which you need to consider when you make your VAT payments, from the amount due to the rate and even the reporting cycle as these vary between countries. We've provided helpful charts so you can check each country's VAT guidelines. 17

18 Country UK Distance Selling Threshold 70,000 VAT Rate 20% Payment Deadline Do you need an EORI number 7th Day of the second month following the end of the quarter For monthly the 7th day of the second month following the period Last working day of the second month following the end of the Annual period, if filing Annually Yes, The UK has its own EORI numbers so it is important to register for an EORI alongside your UK VAT number Instrastat Threshold Arrivals 1.5 Million Dispatches 250,000 Fiscal Representation Filing Frequency Penalty for late filing No Quarterly, Annual or Monthly Up to 5% of VAT owed, but can exceed this figure if payments are regularly made late / VAT Returns filed late Other Information: The UK has a reduced VAT rate and a zero VAT rate. Certain products such as coffee, children s clothing and safety equipment are all zero rated within the UK and can add extra room in your margins. The UK also has the Flat Rate Scheme. This allows for small sellers turning over less than 150,000 per year to have a reduced VAT rate paid to HMRC. What is the catch? Under the flat rate scheme, you cannot reclaim your import VAT, except in specific circumstances. The amount you keep from the sales VAT is meant to offset what you would have reclaimed in import VAT normally working out in your favour. Ask your tax agent to find out if this is the right programme for you. in import VAT normally working out in your favour. Ask your tax agent to find out if this is the right programme for you. 18

19 Country Germany Distance Selling Threshold 100,000 VAT Rate 19% Payment Deadline Do you need an EORI number 10th of the following month after the end of the period Yes Instrastat Threshold Arrivals 800,000 Dispatches 500,000 Fiscal Representation No Filing Frequency Monthly unless your German VAT owed is less than 7500 in the last calendar year or if the VAT owed is less than 1,000 in the last calendar year you can file Annually Penalty for Late registration Up to 10% of VAT due (up to 25,000) Penalty for late payment starting at 1% Other Information: If you are a non-eu based seller directly importing into Germany, you may have difficulties importing without a Direct Representative (different from the fiscal representative). Speak to your freight agent for further information. 19

20 Country France Distance Selling Threshold 35,000 VAT Rate 20% Payment Deadline Do you need an EORI number 19th of the following month after the end of the period Yes Instrastat Threshold Arrivals 460,000 Dispatches 460,000* Fiscal Representation Filing Frequency Yes Monthly Penalty for Late registration 10% penalty of the VAT due for late submission 5% penalty of the VAT due for late payment Other Information: For EU based companies, the French tax authorities require a direct debit for all payments made to the tax authorities. Failure to have the direct debit in place will result in a surcharge for each month, currently set at 60 per payment. If you use a Fiscal representative in France, you will typically pay the fiscal representative the amount of VAT owed for them to send to the tax authority *More than 460,000 - detailed Intrastat, Less than 460,000 simplified Intrast 20

21 Country Spain Distance Selling Threshold 35,000 VAT Rate 21% Payment Deadline Do you need an EORI number 20th of the following month after the end of the period for Quarterly VAT Returns 30th of the following month for Monthly VAT Returns Yes Instrastat Threshold Arrivals 400,000 Dispatches 400,000 Fiscal Representation Filing Frequency Penalty for Late registration Yes Quarterly and depending on turnover, Monthly Starting at 75% of 5% of the VAT owed Other Information: To pay your VAT in Spain you will need to have a Spanish Bank account. When registering for VAT you need to firstly Notarise the Power of Attorney documents and then they need to be stamped with the Apostille of The Hague. 21

22 Country Italy Distance Selling Threshold 35,000 VAT Rate 22% Quarterly VAT Return filing deadlines vary depending on which Quarter is being filed: Q1 deadline 16th May Q2 deadline 20th August Payment Deadline Q3 deadline 16th November Q4 deadline 28th February 16th of the following month for Monthly VAT Returns Do you need an EORI number Yes Instrastat Threshold Arrivals 0 Dispatches 0 Fiscal Representation Filing Frequency Yes Monthly or Quarterly Other Information: In Italy, you can file quarterly so long as you pay an additional 1% of the VAT owed. This may help lower your cost of compliance when trading in Italy. 22

23 Country Distance Selling Threshold Poland 160,000 PLN VAT Rate 23% Payment Deadline Do you need an EORI number 25th day of the following month Yes Instrastat Threshold Arrivals 3,000,000 PLN Dispatches 2,000,000 PLN Fiscal Representation Filing Frequency Yes Monthly Penalty for Late registration Interest on VAT due between 2-8% Potential Fine Other Information: In Poland, along with your VAT return, there is a mandatory SAF-T declaration to be filed monthly which declares every transaction within the country. Sales of both inbound and outbound stock movements. 23

24 Country Distance Selling Threshold Czech Republic 1,140,000 CZK VAT Rate 21% Payment Deadline 25th day after the end of the month 25th day after the end of the quarter Do you need an EORI number Yes Instrastat Threshold Arrivals 8,000,000 Dispatches 8,000,000 Fiscal Representation Filing Frequency Yes Monthly or Quarterly. Quarterly dependant on turnover in the previous calendar year Other information The Czech Republic requires an additional Control Statement to be filed alongside the VAT return each month. This shows the inbound stock movements into the Czech Republic, and other information from the Czech VAT Return. 24

25 Country Standard VAT rate Fiscal Rep required Number VAT returns Distance selling thresholds Number of Annual VAT reports Additional VAT Filing UK 20% N 1 or 4 70,000 0 N/A DE 19% N ,000 1 N/A FR 20% Y 12 35,000 0 N/A ES 21% Y 4 35,000 1 N/A IT 22% Y 4 or 12 35,000 2 Modello F24 PL 23% Y 12 35,000 0 SAF-T CZ 21% N 12 35,000 0 Control Statement 기타정보 체코공화국은월별 VAT 신고와함께추가적으로 Control Statement 제출을요구합니다. Control Statement 는체코공화국으로들어오는재화이동과체코 > 공화국의 VAT 신고에관한기타정보들을보여줍니다. 25

26 Glossary Of Terms Bill of Lading Receipt of cargo or a shipment (generally issues by a carrier or their agent) Entity A person, partnership, organisation or business that has a legal and separately identifiable existence. Fiscal Representative Acts on behalf of a non-resident company with respect to all its supplies of goods and services for which VAT is due Flat Rate Scheme UK government scheme Freight Forwarder Is a person or business that organizes shipments for individuals or corporations Importer of Record Used in Custom Law. It refers to an Importer who is an individual or an entity SAF-T Document Standard Audit File for Tax Sole Trader Exclusive owner of a business Taxable Supply Goods for onward sale 26

27 Collect funds from foreign marketplaces. Pay international suppliers. Grow your network. SIGN UP NOW Payoneer empowers global commerce by connecting businesses, professionals, countries and currencies with its innovative cross-border payments platform. In today s borderless digital world, Payoneer enables millions of businesses and professionals from more than 200 countries and territories to reach new audiences by facilitating seamless, crossborder payments. With Payoneer, you can receive payments from hundreds of marketplaces across the world and promote your brand to international consumers. Easily collect your earnings from any marketplace, quickly, at low cost, in your own currency and using the method that best suits your needs. Learn more about Payoneer Learn more about SimplyVAT 27

28 @ Payoneer; All Rights Reserved. This publication is for informational purposes only and is not intended to provide any professional or business advice. Although the information provided in the publication is intended to be current and accurate, no warranties whatsoever are made in respect to it. Payoneer is not responsible for any errors or omissions in the content of the publication and no entity or person at Payoneer is liable for any losses suffered by any person or entity that relies on this publication. 28