English
VAT Registration Thresholds for 2019/2020: When should I register for VAT?
One of the most important things for an online business is to always stay tax compliant. Getting a VAT Identification Number to ensure compliance is usually one of the first steps and there are several reasons that require you to have this number. One of the reasons is when you reach the ‘Annual Distance Selling Threshold Limit’. Below amavat® will explain to you what the threshold limit is all about and when should you register for VAT.
What Exactly is VAT?
The assessment of value-added tax is on the value that is added to goods or services bought and sold in the EU. This applies to all commercial activities concerning the distribution and production of goods and the provisions of services. It is a so-called consumption tax, as it is required to be paid by the consumer and not the producer.
All EU Member States have their own VAT rates and for different product categories, there are also different rates that might apply.
You can see all VAT rates throughout Europe here, or specifically in Amazon’s main European marketplaces: Germany, the UK, France, Italy and Spain and how amavat® can provide the perfect solution when it comes to ‘VAT Registration’. We will also highlight the ‘VAT Thresholds’ in Poland and the Czech Republic.
Germany
Due to Germany being one of the largest Amazon marketplaces within the EU, it is certainly worth expanding your online business in to. You will know the VAT rate that apply vary throughout Europe from country to country. The ‘Standard VAT Rate’ in Germany is currently 19%, however, there are particular types of goods for which different rates apply.
Countless FBA sellers in the EU start their online careers on the German Amazon market. Consequently, they do have a German VAT number. Online sellers who are established somewhere else and are selling their products/goods from abroad to Germany (‘Distance Selling’) require to acquire a ‘VAT Registration’ if they reach the ‘Annual Threshold Limit’.
If we assume you are an online seller in the UK and sell to several EU countries, with the products/goods you sell online to Germany equate to €50,000.00. Then there is no problem. As soon as the annual threshold of €100,000.00 is reached, you are required to register for VAT in Germany due to the ‘Annual VAT Threshold Limit’ for Germany being €100,000.00.
Please make yourself familiar with the information regarding Germany.
The UK
The UK, as of October 2019 is still part of the European Union, and is still one of the most significant countries when it comes to eCommerce in general and to selling on Amazon in general. There are still countless people deciding to start their career as an ‘online seller’ on Amazon.uk. There are many reasons why this can be a good idea, the taxation issue, more precisely the VAT in the UK.
Please make yourself familiar with the information regarding The UK.
France
Just like all the other EU countries, ‘la Grande’ nation has its own VAT rates, nevertheless, France may have a higher range of different rates. As mentioned earlier, there are different product types and that varies from country to country. In the case of France, there are numerous VAT rates. France is also permitted to set its own ‘standard rate’ (as long as it exceeds 15%), but you will see that this is not the only VAT rate. Essentially there are 5 different ones in France.
Please make yourself familiar with the information regarding France.
Italy
As an EU Member State, Italy is of course also “using” VAT to handle national and international sales. Here we will show you what VAT rates there are and what you should know about VAT in Italy.
Please make yourself familiar with the information regarding Italy.
Spain
Many thousands of FBA sellers use Amazon.es, the Spanish Amazon marketplace, to sell their products. Of course staying VAT compliant, if required, is something every seller requires to take care of. But what rates are there, and which rates apply to me?
Please make yourself familiar with the information regarding Spain.
Poland
FBA sellers throughout Europe are continually developing their online businesses and the next expansion is often only a few steps away. Unfortunately, with entering new marketplaces, the requirement of additional ‘VAT Registrations’ is becoming relevant also. You can sell from one country to others within the EU, but as soon as you reach the annual VAT threshold limit of a country, a ‘VAT Registration’ in this country is mandatory.
As you may know, there are many reasons which require an appropriate VAT registration. This can be storing in the country, setting up a business or simply reaching the ‘Annual Threshold Limit’ via distance selling.
Exporting goods as an online seller to certain countries doesn’t lead to the obligation of a VAT registration, as long as the ‘Annual Threshold Limit’ of the country of import is not reached. As soon as the annual limit is achieved, you are required to get a VAT number in the country of import.
If we assume you are an online seller who is based in Germany and who wants to sell into Poland. The German VAT number is all that you require, as long as the Polish VAT threshold limit is not exceeded (€37,000.00). As soon as you reach this figure due to ‘Distance Selling’, you will require a VAT number in Poland as well (so now in Germany and in Poland).
Additional registrations will be required for each additional country in which you reach the ‘Annual Threshold Limit’.
Please make yourself familiar with the information regarding Poland.
The Czech Republic
It is very important to be tax compliant and can be an issue when selling online. Obviously, there are many reasons that might require a proper ‘VAT Registration’. The ‘Annual Threshold Limit’ for ‘Distance Selling’ is one of them.
Typically, a European Union ‘VAT Registration’ for an EU-company is obligatory when this company is selling goods across EU borders directly to consumers who have ordered via the internet or catalogues for example – that is known as ‘Distance Selling’.
For example – when you are selling your goods from Germany to customers in Poland, the ‘VAT Registration’ is only required if the ‘Annual Threshold Limit’ of the country of import is achieved. The threshold limit when importing into the Czech Republic is approximately €43,000.00.
Please make yourself familiar with the information regarding The Czech Republic.
Are indeed all sales liable to VAT?
Briefly speaking: No, they are not. There are some online sellers that are not registered for VAT, because the turnover is too low, nevertheless, FBA sellers for example have to be registered anyhow due to ‘storing’ and ‘selling’ from a country which is also a reason that makes having a ‘VAT Identification Number’ compulsory.
How can I calculate my prices?
If you keep in mind that every country can set its own VAT rate and by taking a look at the graphic below, setting the prices correctly and calculating with VAT should not be too difficult.
| How to calculate VAT | |
|---|---|
| Product + Shipping | 10 € |
| + Amazon Fees | 5 € |
| + Margin | 10 € |
| = Sales Price (net) | 25 € |
| + VAT UK 20% | 5 € |
| = Sales Price (gross) | 30 € |
You can also click here to use Amazon’s VAT Calculation Service.
When should I Register for VAT?
There can be many reasons that lead to the requirement to attain a ‘VAT Registration’. If you are ‘storing in’ and ‘selling from’ an EU country, or setting up a business in a country, you are required to register for VAT and take care of your filings and returns.
But there is also a third reason that legally obliges you to request a ‘VAT Identification Number’ in a foreign country: that is reaching the annual threshold limit for distance selling.
If you are indeed selling abroad via ‘Distance Selling’ within the EU, the VAT number of the country of residence for your business is used as long as you do not reach the ‘Annual Threshold Limit’ of a country of import.
If you are expecting a VAT-taxable turnover that exceeds the threshold limit within a 30-day period, will also lead to the requirement of a ‘VAT Registration’!
What exactly is a ‘VAT Registration Threshold’?
The ‘VAT Registration Threshold’ is a maximum value, which is different in all European countries, and online sellers are required to register for VAT in the country they are ‘selling to’ when this limit is reached. So distance selling, e.g. via online mail orders, or rather the turnover of the distance sales, is something that requires to be watched.
If we are to sum it up, it’s the limit which is exceeds will then lead to tax obligations and duties, and the turnover is what counts.
The turnover is very significant
Thresholds are well-defined, and the turnover is the number that can reach the limit. But there are in some circumstances a way to at least lessen the actual turnover a little. The VAT born on stock that was purchased for resale is the amount by which you may decrease the value of the turnover.
This makes sense if the amount of acquired VAT decreases your turnover to a level which is under the ‘Annual Threshold Limit’.
What are the VAT Thresholds in Europe?
Below you will see a short summary of the ‘Annual Threshold Limits’ of the larger Amazon marketplaces within the EU, followed by an example.
| Country | Threshold Limit |
|---|---|
| Germany | € 100,000 |
| United Kingdom | £ 70,000 |
| France | € 35,000 |
| Spain | € 35,000 |
| Italy | € 35,000 |
Example:
If an online seller is based within in the UK and sells to various EU countries and the products he/she has sold to Germany within the first year had a total value of € 50,000.00. This would mean that the threshold limit was not reached and no further actions are required, as the ‘Annual Threshold Limit’ for distance sales to Germany is €100,000.00. As soon as this limit is indeed reached (or preferably shortly before), you are required to register for VAT.
Obviously, all EU countries have their own threshold limits and the popularity of a specific item can vary. It frequently depends on the market of the country, the climate, and the trends – the people in general.
A Summary: VAT Threshold Limits in Europe
Keeping a close eye on threshold limits when your sales numbers to a specific country are rather high is absolutely recommended to make sure to circumvent penalties and avoidable paperwork.
When you act on time, the one-time processes can be ticked off rapidly, but ‘VAT Registrations’ always mean future duties like regular filings and returns.
amavat® can ensure the correct handling of all the processes involved and to get back to the VAT Threshold Limits, using our software directly you can monitor all current sales and how close you are to potentially reaching threshold limits in the countries you are selling into.
With amavat® professional and reliable experts looking after you from a ‘real’ local level you will feel confident in our ability to look after your online business.
If you have any further questions, please do not hesitate to contact us.
amavat® provides a one-stop-shop solution for VAT Compliance within Europe. We assist clients with a single point of contact that speaks their language and handles all VAT related issues with a standard and cost efficient approach.
To find out more information please visit www.amavat.eu
