A Guide to EU VAT for Non-EU Businesses
For non-EU businesses selling goods or services in the European Union, understanding and complying with the EU’s VAT (Value-Added Tax) system is essential. Whether you're an e-commerce retailer shipping to EU customers or a service provider catering to EU clients, navigating the intricacies of VAT can feel daunting. This guide provides a clear overview of how the EU VAT system works for those businesses based outside of the EU.
Key takeaways
- VAT registration may be required if you're a non-EU business selling to EU consumers, importing goods, or holding stock in an EU country.
- Simplified VAT schemes like OSS and IOSS help streamline compliance and reporting across multiple EU member states.
- Some countries require a fiscal representative for non-EU businesses—working with a provider like Taxually can help ensure full compliance.
How does the EU VAT system work?
The European VAT system is a consumption tax applied to the sale of goods and services within the European Union. VAT is charged at each stage of the supply chain, from production to the final consumer, with businesses collecting and remitting the tax to the relevant tax authority.
VAT rates vary between EU member states, ranging from standard rates (usually between 17% and 27%) to reduced rates for specific goods and services. Non-EU businesses selling directly to EU consumers must comply with VAT obligations, including charging the correct VAT rate based on the customer’s location.
Do I need to register for EU VAT?
Non-EU businesses may need to register for VAT in the EU under the following circumstances.
Distance selling to EU customers
If a non-EU business sells goods to private individuals in the EU (B2C) and exceeds the distance selling thresholds, VAT registration is required in the respective EU country. Since July 2021, the EU introduced the One Stop Shop (OSS) system, which simplifies compliance by allowing businesses to register in one EU country to report VAT for all EU sales.
Importing goods into the EU
Non-EU businesses importing goods into the EU need to pay import VAT. They may also need to register for VAT in the country where the goods are imported.
Digital services to EU consumers (B2C)
Non-EU businesses providing digital services (e.g., e-books, software, streaming) to EU consumers are required to charge VAT at the customer's location. The Non-Union One Stop Shop can be used to simplify this process.
Holding stock in an EU country
If a non-EU business stores goods in an EU country (e.g., for use in fulfillment centers), it must register for VAT in that country.
Providing certain services in the EU
If a non-EU business provides services that are subject to VAT in the EU, it may be required to register depending on the specific VAT rules of the country.
Marketplace sellers
Since July 2021, marketplaces such as Amazon are responsible for collecting VAT on behalf of non-EU sellers for certain transactions. However, sellers may still need to register for VAT for other types of sales or to comply with local rules.
How do I register for VAT in the EU?
To register for VAT in the EU, you typically need to determine the country where registration is required based on your business activities (e.g., sales thresholds, storage of goods, or digital services). You will then need to gather the necessary documents and submit these to the local tax authority in the relevant country, either online or through their official forms.
To streamline and simplify the VAT registration, remittance, and reporting process, businesses can often choose to register for an EU VAT scheme like the OSS or IOSS.
Selling through a marketplace
For businesses selling through online marketplaces like Amazon or eBay, the deemed supplier rule shifts VAT collection responsibility to the marketplace for specific transactions. This simplifies compliance for sellers but requires careful coordination with the platform to ensure VAT is correctly charged and reported.
Selling through Amazon FBA
Amazon FBA sellers often store goods in multiple EU countries, which can trigger VAT registration requirements in each country where inventory is held. Using the OSS scheme can help consolidate reporting, but you may still need to register in specific countries depending on your storage locations.
B2C sales to EU customers totaling over €150
For non-EU businesses selling directly to EU consumers where the total value of goods exceeds €150, VAT registration is typically required in each EU country where you sell.
Alternatively, you can register for the OSS scheme. The One-Stop Shop is designed for EU and non-EU businesses making cross-border sales of goods and services within the EU. It allows you to report and pay VAT for multiple countries through a single return.
B2C sales to EU customers totaling less than €150
For goods under €150, non-EU businesses can use the IOSS (Import One Stop Shop) scheme, which simplifies VAT collection and remittance across EU member states.
Once registered for the scheme, businesses must remit any VAT owed via monthly IOSS filings.
What information is required to register?
When registering for VAT, you will typically need:
- Business name and contact details
- Proof of business activity (e.g., invoices, contracts)
- Tax identification number (TIN) or equivalent
- Details of EU operations, including sales volume and storage locations
- Bank account information for tax remittance
The exact requirements may vary depending on the country and your business model.
Do I need a fiscal representative?
Some EU countries, such as France and Spain, require non-EU businesses to appoint a fiscal representative to manage their VAT obligations. A fiscal representative acts as a liaison between your business and the tax authorities, ensuring compliance with local VAT rules. Taxually can provide fiscal representation for non-EU businesses in all countries where it’s required.
Conclusion
Navigating the European VAT system may seem complex, but with the right knowledge and support, it’s entirely manageable. Understanding your obligations and seeking expert advice can help ensure your business remains compliant and continues to thrive in the EU market.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
Frequently Asked Questions
What is EU VAT and how does it affect non-EU businesses?
EU VAT is an indirect tax applied in the EU. Non-EU businesses must charge, collect, and remit VAT when selling to EU consumers.
When does a non-EU business need to register for VAT in the EU?
VAT registration is required if you sell to EU consumers, import goods, provide digital services, or store inventory in the EU.
What is the difference between OSS and IOSS schemes?
OSS is for B2C sales over €150 across the EU, while IOSS applies to imported goods under €150 to simplify VAT reporting.
Do I need a fiscal representative in the EU?
Yes, in some EU countries like France or Spain, non-EU businesses must appoint a local fiscal representative.
How long does it take to get VAT registered in the EU?
It usually takes 2–8 weeks, depending on the country and documentation provided.
Can I sell to EU customers without registering for VAT?
In most cases, VAT registration is required if your business activities meet EU tax thresholds or conditions.
