B2C EU VAT Rules for E-commerce

Navigating the complexities of Value Added Tax (VAT) in the European Union (EU) is crucial for e-commerce businesses, especially in the wake of Brexit.

This guide provides small to medium-sized enterprises (SMEs), entrepreneurs, and business owners with comprehensive insights into B2C (Business to Consumer) VAT rules in the EU. By reading on, you will gain a clear understanding of the new regulations, practical steps for compliance, and how J. Dauman & Co. can support your business in this transition.

What Are The B2C VAT Rules in the EU?

The EU VAT rules for B2C transactions are designed to ensure fair competition and simplify VAT compliance across member states. Here are the key points:

VAT Registration Thresholds: Businesses must register for VAT in each EU country where their sales exceed a certain threshold. Post-Brexit, this threshold is €10,000 for total cross-border sales.
One-Stop Shop (OSS) Scheme: Introduced in July 2021, this scheme allows businesses to report and pay VAT for all EU sales via a single quarterly return.
Import One-Stop Shop (IOSS): Applicable for goods valued up to €150, simplifying VAT collection and remittance for non-EU businesses.
Distance Selling Rules: Abolished country-specific thresholds, replaced with a unified €10,000 threshold.
Digital Services VAT: VAT is charged based on the consumer’s location for digital services.

How To Charge VAT To EU Consumers

The rules for charging VAT to EU consumers changed significantly post-Brexit, impacting how UK businesses handle VAT for B2C transactions.

Do I Charge VAT to EU B2C Customers?

Yes, you generally need to charge VAT to EU customers. Here’s how:

Goods Sold from the UK to EU Customers: You must register for VAT in the EU country where your customers are located if your sales exceed the €10,000 threshold.

Example: A UK-based online retailer selling clothes to French customers must charge French VAT if their sales to France exceed the threshold. This VAT is collected at the point of sale and remitted via the OSS.

What Are The New EU E-commerce VAT Rules?

The new rules simplify VAT processes through the OSS and IOSS schemes:

Union OSS: Allows businesses to register for VAT in one EU member state and report all EU sales through a single quarterly VAT return.
Import OSS (IOSS): Simplifies VAT for goods valued up to €150, collected at the point of sale, and reported monthly.
Practical Example: A US-based company using IOSS can sell low-value goods to multiple EU countries and report VAT through one EU member state, streamlining compliance.

How Do You Account For VAT on EU Sales From The UK?

Here are the steps and procedures for accounting for VAT on EU sales:

Register for VAT: In the relevant EU countries or use the OSS.
Charge the Correct VAT Rate: Based on the customer’s location.
Maintain Accurate Records: Keep detailed sales and VAT records.
File VAT Returns: Use the OSS to file a single quarterly VAT return or file separate returns in each relevant country.
Use VAT Compliance Software: Automate VAT calculations, invoicing, and reporting.

FAQs About EU VAT

Does UK VAT Go To The EU?

Post-Brexit, UK VAT does not go to the EU. UK businesses selling to EU consumers must comply with the VAT rules of the respective EU countries, and the collected VAT is remitted to those countries. Intermediaries may be required for IOSS registration to handle VAT remittance.

Do I Charge VAT on Services from the UK to EU?

Yes, for certain services. For digital services, VAT is charged based on the customer’s location in the EU. For professional services, such as legal and accounting, B2B services are generally outside the scope of UK VAT. However, B2C services provided to non-business customers in the EU may require VAT to be charged based on specific rules.

What Are the Benefits of Using the One-Stop Shop (OSS) for My Business?

The OSS scheme simplifies VAT compliance by allowing businesses to register for VAT in a single EU member state instead of multiple countries. It enables businesses to file one quarterly VAT return for all sales across the EU, reducing administrative burden and avoiding the need for multiple VAT registrations.

For example, if you are a UK-based e-commerce business selling to customers in France, Germany, and Italy, using OSS allows you to handle all VAT obligations through a single registration and return in one EU member state.

Do I Need an Intermediary to Use the IOSS?

Non-EU businesses, including those in the UK, are required to appoint an intermediary to use the IOSS. The intermediary handles VAT reporting and payment on your behalf, ensuring compliance with EU VAT regulations.

If you find the cost of appointing an intermediary prohibitive, you can use online marketplaces that collect import VAT automatically under the deemed supplier rules. Alternatively, VAT can be collected at the point of importation by the courier or postal operator, although this may incur additional fees for your customers.

How Does Brexit Affect My VAT Obligations When Selling to the EU?

Post-Brexit, UK businesses face several changes in VAT obligations. UK VAT no longer applies to sales to EU consumers; instead, EU member states’ VAT rules must be followed.

For B2B services, the reverse charge mechanism applies, meaning the EU business customer self-accounts for VAT. For B2C sales, VAT must be charged based on the customer’s location, and you may need to register for VAT in multiple EU countries or use the OSS.

Can I Still Claim VAT Refunds from EU Member States?

Yes, UK businesses can claim VAT refunds from EU member states, but the process has changed. Refund claims must now be processed through the systems designed for non-EU businesses, which involves different paperwork and potentially longer processing times compared to pre-Brexit claims.

What Should I Include on My VAT Invoices for EU Transactions?

VAT invoices must include the following details: date of issue and unique invoice number, supplier and customer full name and address, description and quantity of goods or services supplied, unit price, VAT rate applied, and VAT amount payable. For B2B transactions, you should include the reverse charge narrative if applicable.

How Does the Reverse Charge Mechanism Work for B2B Services?

For B2B services supplied from the UK to the EU, the place of supply is the customer’s location. The EU business customer self-accounts for VAT using the reverse charge mechanism. The UK supplier includes the sale in Box 6 of their VAT return but does not charge VAT.

Do I Need to Register for VAT in Every EU Country Where I Have Customers?

Not necessarily. You have two main options. You can use the OSS scheme to register for VAT in one EU member state and report all EU sales through a single quarterly return. Alternatively, if you prefer not to use the OSS, you must register for VAT in each EU country where you exceed the VAT registration threshold of €10,000 in cross-border sales.

What Are the Specific VAT Rules for Digital Services to EU Consumers?

For digital services supplied to EU consumers, the place of supply is where the customer resides. You must charge VAT based on the customer’s location. You may use the VAT Mini One Stop Shop (MOSS) non-Union scheme to simplify reporting and payment if applicable.

Need Help With Your EU VAT Compliance for E-commerce?

Understanding and complying with B2C EU VAT rules is crucial for e-commerce businesses operating within or selling to the EU. Leveraging schemes like the OSS and IOSS can help e-commerce businesses simplify their VAT obligations and ensure compliance. Staying informed about VAT regulations and seeking professional advice will enable you to navigate these changes confidently and successfully.

For expert guidance in EU VAT compliance, J. Dauman & Co. is here to assist you. As specialists in e-commerce accounting, we are well-equipped to help you through the new EU E-commerce VAT Rules. Our comprehensive services ensure your business remains compliant with EU VAT rules, simplifying your international trade operations. Learn more about our VAT services.