Distance selling VAT thresholds for selling to EU using DAP no longer apply. Can anyone confirm?

Discussion in 'International Business' started by JRatron, Jan 14, 2021.

  1. JRatron

    JRatron UKBF Contributor Free Member

    96 9
    I've contacted Avalara and a couple of other tax handling agencies and I'm being told that as of 1st Jan 2021, if we're selling goods (both B2B and B2C) from UK into EU and sending DAP where the customer is responsible for paying the import costs, that there is now no distance selling threshold in place for any of the EU countries where we must register for VAT.
    It's quite clear and straightforward guidance, but I can't find anywhere where this is published for me to be totally satisfied it's correct.

    We would ultimately like to be registered for VAT in several EU countries to improve the customer experience, but are holding out for the OSS scheme to come into place so it's not an expensive admin nightmare.
     
    Posted: Jan 14, 2021 By: JRatron Member since: Jan 30, 2006
    #1
  2. 2JP

    2JP UKBF Contributor Free Member

    96 8
    I think distance selling thresholds only apply if you are in the EU. We are not now.

    I think maybe different for digital goods B2C and things change again on 1st July with IOSS.
     
    Last edited: Jan 14, 2021
    Posted: Jan 14, 2021 By: 2JP Member since: Dec 10, 2017
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  3. JPMiddleton

    JPMiddleton UKBF Regular Free Member

    281 35
    Would you mind sharing how this will improve customer experience? Genuine question - I may be missing the obvious but it’s eluding me.
     
    Posted: Jan 14, 2021 By: JPMiddleton Member since: Aug 18, 2011
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  4. 2JP

    2JP UKBF Contributor Free Member

    96 8
    I think they mean DDP, so customer is not bothered with having to handle import customs, possible duties and paying VAT to border customs/intermediary. Not sure if you need to register in every country but whichever country you do, you would need to complete the regular VAT returns and some countries may require physical representation. I would get expert help if we needed to do this and would try our best not to have to.
     
    Posted: Jan 15, 2021 By: 2JP Member since: Dec 10, 2017
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  5. JRatron

    JRatron UKBF Contributor Free Member

    96 9
    It would mean that we're registered for VAT in the customer's country, so we can charge the appropriate taxes and be responsible for the whole process up to the point it gets to their door using a DDP service. So the customer sees upfront on our website exactly what the cost will be in their local currency and with all taxes paid. No concern with customs, forms to fill in, extra delays whilst the payment is requested and gets processed, all this extra hassle is no longer their responsibility or concern.

    Yeah, exactly. Technically it's fairly straightforward for us to charge a different tax rate to each country and report on it afterwards, but the hassle and expense of dealing with multiple countries tax requirements and returns is something I really want to avoid. You can use someone like Avalara who handle all the registrations and returns for you and have a web portal to make it less painful, but it's not cheap when you start adding it up.

    In theory the One Stop Shop tax scheme that's coming into place in Europe should dramatically reduce the hassle of all this, but it's at least 6 months off and people I've spoken to this week say that date's very likely to be pushed back till at least next year
     
    Posted: Jan 15, 2021 By: JRatron Member since: Jan 30, 2006
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  6. JPMiddleton

    JPMiddleton UKBF Regular Free Member

    281 35
    I did think that’s what you meant, but I wasn’t sure. We have been doing DDP since January 1st through DHL. You definitely don’t need to register for VAT in every country, it just gets recorded as an expense when DHL charge us on the invoice after delivery.
     
    Posted: Jan 15, 2021 By: JPMiddleton Member since: Aug 18, 2011
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  7. 2JP

    2JP UKBF Contributor Free Member

    96 8
    And do you reclaim the VAT element through VAT returns to wherever your EU VAT registration is? If you import into an EU country other than your country of EU VAT registration, do you need to do EC sales lists for sales to VAT registered customers? What about B2C? Do you have a 'single point of clearance'? To me it is a complex area. Some people advise that DDP does not even mean that VAT payment by the supplier is mandatory (duties yes), while others do. Seems like a minefield to me where hand holding is needed at least until established.
     
    Posted: Jan 15, 2021 By: 2JP Member since: Dec 10, 2017
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  8. 2JP

    2JP UKBF Contributor Free Member

    96 8
    Last edited: Jan 16, 2021
    Posted: Jan 16, 2021 By: 2JP Member since: Dec 10, 2017
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  9. DefinitelyMaybeUK

    DefinitelyMaybeUK UKBF Contributor Free Member

    53 8
    That sounds feasible to me, but I'm far from a VAT expert ! In my simplistic view if DHL are liable for the VAT as importer, then as long as they pass on their expenses to recoup their VAT outlay, I can't see a problem with that - but the caveat would be that the B2C invoice from the UK seller can't legitimately state a "VAT at xyz" amount is being charged as it can't be reclaimed by the buyer (not that a EU buyer could [easily, if at all] reclaim an online VAT purchase, hence previous intra-EU ex VAT sales for B2B). Presumably, the seller invoice can only state "Taxes and handlings fees" ? Is this why companies like Transglobalexpress are offering a pseudo "Delivered Taxes Paid" DTP service (not quite a DDP service, but a similar experience outcome to the seller & buyer without the need for in-country VAT registration)?

    As as aside, I'm guessing for a true B2B sale, where both the UK seller and EU buyer are VAT registered, you'd never want to go down the pseudo DTP route, as the buyer could never (legally) reclaim the VAT and as such the only terms should be DDU/DAP?
     
    Posted: Jan 16, 2021 By: DefinitelyMaybeUK Member since: Jan 12, 2021
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  10. 2JP

    2JP UKBF Contributor Free Member

    96 8
    I think you need some VAT advice. This is my point.

    For any delivery, if you, as the ex-EU supplier, payer of import VAT and named importer into an EU country satisfy all the requirements of import (possibly requiring representation of some kind - your representative then possibly being the named importer) and VAT registration in that country or are registered in a country that is allowable to the country of import then you can charge VAT on your invoice to the customer at the rate of the registered-in country and report it on your EU VAT registered VAT return to that country or the country that was allowable where your VAT registration is (then with EC sales list?). As long as all the requirements for VAT were satisfied, I believe a B2B customer could then account for the VAT that they paid you as shown on your invoice to them in their domestic VAT return (your EU VAT number would be on the invoice and so would your customer's). See Farnell example below.

    Here's an example of a larger company, with FAQs, that has most probably put all the DDP VAT requirements in place:
    https://www.farnell.com/brexit/
    'If you buy from one of our EU based businesses, you are unlikely to see any changes at all. You will continue to be invoiced in the same way by those businesses. Stock from our UK warehouse will be imported by Farnell into the EU through Germany, with our UK business acting as the Importer of record.'
    My German reference in the last post possibly explains the German EU registration.
     
    Posted: Jan 16, 2021 By: 2JP Member since: Dec 10, 2017
    #10