The startup guide to VAT compliance

You may have read about VAT for cross-border trade and wondered if it applies to you. Since 2015 countries implemented new rules to tax cross-border e-commerce.  According to such rules merchants which sell online need to pay VAT in the country of the customer.

 

Who is affected

If those two statements below are relevant to you might need to read this article further:

1. I sell online.

2. I sell to private individuals (not companies) in several (more than one) countries.

3. I sell goods via the marketplace.

 

Who is not affected

If you sell using big marketpalces they manage VAT as agents in the chain and withhold local VAT from the sum received from customers. In this situation, you have nothing to worry about.

 

What are the steps to comply with the rules

1. Register for VAT in countries where you have customers.

2. Collect data about your customers: IP address, payment method country, delivery address, phone number.

3. Choose pricing strategy: inclusive  or exclusive (VAT on top of price).

4. Calculate VAT for each transaction.

5. Submit VAT returns in each country your customers are.

6. Keep VAT related data for 10 years.

 

Where tax authorities receive information

Tax authorities can receive information about your transactions from several sources :

  • marketplaces
  • payment processors
  • payment systems
  • customs etc.

 

What will happen if I will not pay VAT

  • penalties: they differ from 10% to 100 % from revenue in particular country
  • website blockage 
  • delivery of goods stopped at customs