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9 Oct 2000, Belgium
Dear Dr Ecommerce,
These VAT issues are giving me a headache. I am currently starting a e-commerce website selling car parts, which is based in Belgium. We believe most of our customers will be Belgian but also European and beyond. As far as the home country is concerned, there is no problem. But here are my questions:
- Do I apply VAT on the products order by a European private client ?
- Do I apply VAT on the products order by a European professional client ?
- Do I apply VAT on the products ordered by a non European private or professional client ?
For the same cases, do I apply VAT on the transportation costs ?
From your reply to a previous question asked by Fiona, I understand there are thresholds for each country. From a certain value in terms of transactions, a VAT representation has to be registered in the country of importation. Where can I find the list of these thresholds and VAT rates in each EU country ? and is that rule applicable for all e-commerce (or distances sellers) of all EU countries ?
Thank you so much,
Vincent
Dear Vincent:
Don't worry. You are not the only one with a headache. Indeed, a growing industry in Europe is providing VAT services for small companies with VAT headaches!
You do apply VAT on orders by all European clients regardless of whether they are private or professional. Initially, that VAT will be at your rate. However, if sales to consumers in member states exceed the member state's threshold, then you need a VAT representative in that member state and must charge VAT at that member state's rate. You also apply VAT to sales outside the EU - but the rate 0%. As silly as it may seem, you need to send non-EU customers a VAT invoice in which the VAT rate is given as 0%.
VAT must also be applied to the shipping costs. If the shipper is another company, they are applying VAT to their charges to you, so you must take this into account when charging your customer - you can't apply VAT to a price that already has VAT applied to it. In other words, if the shipper charges you 12.10 Euro (10.00 Euro + 21% VAT), you charge the customer 10 Euro for shipping + 21% VAT, not 12.10 + 21% VAT.
You can find more information about VAT from the Taxation and Customs Union Directorate General's web site at http://europa.eu.int/comm/taxation_customs/index_en.htm.
As you point out, VAT is headache inspiring stuff and I strongly recommend you use the services of an accountant knowledgeable about VAT to avoid mistakes. You'll save money in the long run.
Good luck,
Dr. Ecommerce