Are you willing to reach EU and UK customers but having a hard time with VAT registration? VAT regulations for cross-border sales can discourage many businesses to expand globally.
However, understanding VAT helps you reach the biggest markets in the world and the knowledge is well worth the trouble. The United Kingdom is the third bigger e-commerce market in the world. As for the European Union, its B2C e-Commerce market significantly grew last year.
Understanding and complying with VAT rules can therefore open the door to prolific markets. And you don’t have to go through VAT compliance on your own: Eurora can help you with all VAT related issues.
Let us guide you through all you need to know about VAT registration: EU VAT, OSS, Non-Union OSS and UK VAT.
What is VAT?
Let’s begin with the fundamentals. You probably know that VAT stands for Value Added Tax. But do you know what that entails? VAT is a general tax that applies to all goods and services that are bought and sold. Taxes on goods and services are used worldwide. In the European Union and in the United Kingdom, we commonly name it VAT.
VAT is a consumption tax because it is not a charge for businesses, but for the final consumer. However, when you sell your goods to customers, you need to act as a middleman. You must collect the VAT, and then submit it to the customer’s government.
It is therefore essential for you to know how to charge VAT on your customers. Governments will request the taxes whether you charged your customers or not. So, if you don’t charge your customers, you will be paying VAT out of your pocket.
The EU VAT is semi-harmonized. The European Union sets guidelines, but each Member State applies its own tax rates. For example, Hungary has a VAT standard rate of 27% while in Germany standard VAT rate is 19%. And those rates are frequently updated.
The UK VAT is not managed by the EU anymore, but separately by the HM Revenue &Customs (HMRC). If you are selling goods to UK Customers, you should know about the new UK VAT rules that resulted from Brexit.
EU VAT registration
Do I need to register for EU VAT?
Most businesses trading inside the EU need to register for VAT and get a VAT registration number. More precisely, you must register for VAT if you:
- Supply goods or services taxed with VAT
- Make an intra-EU acquisition of goods
- Receive services for which you are liable to pay VAT
- Supply services for which the customer is liable to pay VAT
Those requirements apply equally to companies from within EU and non-EU companies.
EU VAT scheme has been in place for many years. However, it has been completely disrupted last year when the European Commission enforced new trade rules. The way VAT is collected has undergone major changes, and VAT registration has not been spared either.
As a consequence, businesses trading with the EU for many years were suddenly at risk of losing their customers. To make these new VAT requirements easier, the European Union created several schemes. They depend on where your business is based, and what you are trading.
Have you heard about IOSS, OSS, and Non-Union OSS schemes? If you haven’t, here is what you need to know in a nutshell:
- Non-EU companies selling goods valued less than €150 to EU customers should use the IOSS. With the IOSS, you don’t need to register for VAT in each State separately. Are you in this situation? Then check out this guide to know how to register for EU VAT with the IOSS!
- EU based companies selling goods or services to EU customers should use the OSS. They can work with the tax administration of their own Member State.
- Non-EU companies selling services to EU customers should use the Non-Union OSS. With the Non-Union OSS they can pay EU VAT in a single Member State.
How to register for VAT with the OSS?
If you are an EU based company selling to other EU countries, using the OSS for VAT registration will make your life much easier.
Until last year, EU companies selling to EU customers didn’t need to bother with VAT in most cases. Each Member State had its own annual VAT threshold limit. And if you didn’t reach that limit, you were not liable to any VAT duties.
However, in July 2021, new rules came. And among other major changes, the European Commission decided to abolish country-specific VAT thresholds. They imposed instead an EU-wide threshold for distance selling of € 10,000.
If your annual revenue is inferior to € 10,000, then VAT is paid in your home country. However, if it reaches this EU-wide threshold, EU VAT is due in each country you sold goods. This means that even if you sent one package to Germany within a year, you need to register for VAT in Germany. And in every other country you sold goods.
To help EU-businesses cope with these new trade rules, the EU created the OSS scheme. The OSS allows you to register for VAT in only one EU country. Sounds like a relief, doesn’t it?
More precisely, if you choose to register for VAT with the OSS, you will be able to:
- Register in a single Member State
- Declare and pay all VAT due in a single electronic quarterly return
- Work with the tax administration of your own Member State. Which means in your own language, even when selling cross border
EU businesses should register for the OSS in the country they are based in. You can submit an online application form to the tax authorities of your country.
Even if the OSS is mostly used by EU companies, there are a few cases where it can be used by non-EU companies. If you are a non-EU business and you make intra-EU distance sales of goods, then you can register for the OSS. For example: you are a US based company, but you hold a stock in a French warehouse and send goods to customers in Italy.
How to register for VAT with the Non-Union OSS?
If you are a non-EU based business and you sell B2C services to EU customers, then you should register for VAT with the Non-Union OSS scheme. More precisely, there are 2 conditions you should meet if you want to benefit from the Non-Union OSS:
- You don’t have a business nor permanent establishment in the EU
- You are not registered for VAT purposes in the EU
When you use the non-Union OSS scheme, you can choose any European country you want to register. You will first need to request a VAT identification number (EU VAT ID) to the member State you chose. Then, you will be able to apply for the OSS scheme in this Member State.
Once you applied, the benefits are the same as for the OSS:
- You register in one Member State only. No need to request an EU VAT ID in each state you sell your services
- You declare and pay VAT due only once every quarter
How can Eurora help me with OSS VAT registration?
The European Union created OSS schemes to facilitate VAT requirements. They are your best option if you want make business in the EU without drowning in regulations. However, the conditions in which each scheme apply can be very confusing.
Furthermore, even if you declare EU VAT in one Member State, you still need to calculate the VAT rate for each parcel. As each Member State applies its own standard and reduced VAT rates, calculating VAT on your own can become a serious hurdle. Especially when you know that VAT is not applied only on goods but also on the shipping costs.
Eurora can relieve you from this VAT return puzzle and help you manage your sales under both OSS schemes.
Do you want to know more about our OSS service? Get in touch with us!
UK VAT registration
Do I need to register for UK VAT?
As we all know, the UK left the European single market. They used to be part of EU VAT scheme, so after leaving the EU, they had to set up their own new VAT rules. The UK VAT is now managed independently by the HM Revenue &Customs (HMRC).
The HMRC established new thresholds and rules that you should be aware of if you have UK customers. If your business is based in the UK, you must register for VAT if:
- You expect your VAT taxable turnover to be more than £85,000 in the next 30-day period
- Your business had a VAT taxable turnover of more than £85,000 over the last 12 months
If your business is not based in the UK, you must register as soon as you supply any goods and services to the UK (or if you expect to in the next 30 days).
UK VAT registration is to be taken seriously, as the grace period that the government granted during the Brexit transition is over. The HMRC made it very clear that you can get a penalty if you register late.
At Eurora, we don’t want to see you lose money because of complex regulations. That’s why we can help you with UK VAT!
How to register for UK VAT with Eurora?
You can register for UK VAT online on the HMRC website. You will need to register for VAT and create an online account. With account, you will be able to submit your VAT Returns to the HMRC.
Registering for UK VAT online and handling your UK VAT returns on your own can be overwhelming. And even more complex if you must handle EU VAT at the same time.
That’s why it makes sense to appoint an agent like Eurora to submit your VAT Returns and deal with HMRC on your behalf. Eurora developed a VAT Agent Service that helps non-UK businesses deal with UK VAT registration and returns. To benefit from our UK Agent Service, you will need to meet these 2 simple criteria:
- You are a non-UK business
- You sell goods with a value of £135 or less in the UK
Our UK Agent Service offers a wide range of benefits from VAT registration to representation with the HMRC. Eurora will also take care of your tax return submissions and help you with all the required tax payments. We make sure you are 100% compliant with all the UK tax regulations.
Want to facilitate your UK VAT returns? Register for UK VAT with Eurora!
Still have questions? Reach out to us! We have been dealing with these regulatory issues for years. Our team counts many VAT experts from private and government sectors. Take advantage of our compliance expertise, save time, and focus on your core activity.