Many online stores are shipping goods and services from the EU to private customers in other EU Member States. Because these private customers do not own a (valid) VAT number in the other member state, an intra-community supply of goods, as well the 0% VAT rate does not apply. These web shops are then subject to the Distance Selling Act.
Regulations of the Distance Selling Act
If a company or an entrepreneur sells goods to a customer without a VAT number in another EU Member State, then first the VAT of the member where the owner is located will be applied.
This may result in distortions of competition within the EU as buyers would logically buy the goods in EU Member States with the lowest VAT rates.
In order to prevent these distortions of competition, rules for selling goods to private customers, companies and companies without VAT number have been introduced.
This regulation is called “distance selling act” and includes, that the place of delivery is determined on the basis of the EU Member State where the transport of the goods ends. In other words: The country of destination.
The VAT will be charged in accordance with the legal regulations
which are in the EU member state, the country of destination, applicable.
This regulation will enter into force when a certain turnover (threshold) is exceeded.
Thresholds per member state
The Distance Selling Act applies only if the turnover (excluding VAT) of the delivery of the goods to the same EU Member State in the previous calendar year or in the current calendar year does not exceed the threshold.
Incase the threshold (exclusive VAT) was exceeded by deliveries in the precious calendar year, then the threshold is no longer valid for the upcoming calendar year.
If the turnover does not exceed the threshold, the Distance Selling Act will not apply. Then the VAT will be levied according the EU Member State, where the company owner is settled.
If for example the threshold is exceeded for the first time, deliveries that exceed the threshold and as well as subsequent deliveries will no longer take place in the EU Member State of origin but in the EU Member State of destination.
Thresholds EU Member States 2018
| Belgium | EUR | 35.000 |
| Bulgaria | BGN | 70.000 |
| Cyprus | EUR | 35.000 |
| Denmark | DKK | 280.000 |
| Germany | EUR | 100.000 |
| Estonia | EUR | 35.151 |
| Finland | EUR | 35.000 |
| France | EUR | 100.000 |
| Greece | EUR | 35.0000 |
| Great Britain | GBP | 70.000 |
| Hungary | HUF | 8.800.000 |
| Ireland | EUR | 35.000 |
| Italy | EUR | 35.000 |
| Croatia | HRK | 263.000 |
| Latvia | EUR | 35.000 |
| Lithuania | EUR | 35.000 |
| Luxembourg | EUR | 100.000 |
| Malta | EUR | 35.000 |
| Netherlands | EUR | 100.000 |
| Austria | EUR | 35.000 |
| Poland | PLN | 160.000 |
| Portugal | EUR | 35.000 |
| Romania | RON | 118.000 |
| Slovenia | EUR | 35.000 |
| Slovakia | EUR | 35.000 |
| Spain | EUR | 35.000 |
| Czech Republic | CZK | 1.140.000 |
| Sweden | SEK | 320.000 |
Possibilities to avoid the Distance Selling Act
Applying the Distance Selling Act can cause various complications. A web shop owner has to keep an eye on the turnover per EU Member State first.
If the threshold is exceeded the VAT rate of the country of establishment is no longer levied. From that moment on the VAT of the EU Member State must be kept.
The web shop owner has the possibility to avoid these complications by not applying the Distance Selling Act to a certain EU Member State.
All distance sales are then taxed in the country of destination.
The company or the entrepreneur is then able to make a decision per EU Member State.
In regards to purchases in EU Member States with a low VAT rate, for example Germany or Luxembourg, the applicable rules to these member states can not be applied. However this rule applies to other EU-Member states.
By submitting a request to the responsible tax office, the Distance Selling Act can be avoided.
Strong penalties in Belgium
The Belgian tax office awards strong penalties when it comes to light that a company or an entrepreneur does not follow the rules of the Distance Selling Act in another EU Member state, even though its legally obliged to do so.
Especially dutch web shop owners are getting into difficulties on a regular basis, because they are not aware of the Distance Selling Act.
When selling to private customers and other buyers without VAT number the threshold is EUR 35.000 and EUR 100.000 EUR as for example in the Netherlands.
It is therefore very important that purchases to Belgian customers without a VAT number do not exceed the threshold of EUR 35.000.
This applies also to companies and entrepreneurs wich are selling their goods for example via amazon.com.
Therefore it is particularly important that Belgian VAT will be declared and paid in Belgium when the threshold is exceeded.
Mini-One-Stop-Shop (MOSS) digital database
Specific rules being introduced to the mini one-stop shop (MOSS) in the EU.
Here it is not necessary for companies and entrepreneurs to register for a VAT number in each country, when selling digital service to private customers to other EU Member States.
It is possible to transmit the VAT due via the MOSS system via an EU Member State.
The EU Commission is planning to improve the MOSS-database. Then it will be possible to use the system for distance sales as well. That would be a great relief for companies and entrepreneurs.
Then it is not longer be necessary to register a VAT number in each EU Member State if goods are sold to another destination country. It is expected that this European VAT system will be introduced in 2021.
Conclusion
It is highly important that companies and entrepreneurs are well informed about the thresholds in the certain EU member states if they sell their goods to private customers which do not own a valid VAT number. If the threshold is exceeded in a particular EU Member State the applicable VAT must be levied.