Selling to the EU and US from web store

[sipexa]

Hi,

For the last months, we were shipping to EU an US from Etsy. But recently orders have started to come through our websites as well.

I have read many things regarding exporting goods from UK. Our wish is product reaches to the customer without any additional interaction or payment from customer.

When order came from Etsy, this process works without any problem. But we do not know how to proceed for orders from websites.

I have read that Stripe can calculate the required tax, but we do not know how do we transfer that tax to the legal entities.

I have read that there is an application which Taxamo Assure by Vertex, do you suggest to use this platform.

If we use Taxomo, I think they are collecting and transfer the payment to the legal entities. In this situation, when I looked to their demo account. Invoice is being generated automatically. This invoice will include taxes for consumer country. Are they transferring the whole payment to our account or are they transferring the amount excluded tax?

In that situation, how can you show this payment on UK accounting.

Could you help please?

Thank you

 

[DefinitelyMaybeUK]

For the US, there is no need to do anything special, so sell your product at the ex-VAT price, as exports are rated 0%. The import threshold for the US is high, around $800 IIRC, so if your goods value is below this limit then no taxes will be due.

For EU, if your goods value is €150 or lower, then you can use the IOSS system so the customer can pre-pay their import VAT. Duty is not applicable for €150 or lower, so no need to worry about that. Depending on your number of EU sales, you may be better to register directly via an intermediary for EU VAT, rather than use a PAYG service like Taxamo. As a rough guide number, over 1000 orders is the break even point. An intermediary is £2000+ a year - Taxamo is £2 per order. Other PAYG services are less, but may not offer the same features.

What is your website based on? Taxamo supply integrations for Magneto and an API. We use their API with no problems. Taxamo is transparent about their fees and there is no minimum orders. There is no (tedious) manual intervention required at end-of-month to submit sales data as it's all automatic.

An OpenCart extension is also available:

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Also look at:

Home - MyVAT

myvat.com

EAS Fully Automated Compliance Solution

EAS automates IOSS, OSS, Non-Union OSS, UK VAT, Swiss Post DDP and EU product safety (GPSR). Full tax compliance solution, no coding needed.

easproject.com

I'm sure they'll be other posts offering alternative services as well...

Check out RM for an overview here:

https://www.royalmail.com/business/international/guide/delivered-duties-paid-ioss

This invoice will include taxes for consumer country. Are they transferring the whole payment to our account or are they transferring the amount excluded tax?

No, that's not how Taxamo works. Taxamo does not collect any payment from the customer. All customer payments are to your normal website check-out. Taxamo facilitates this transaction by possibly calculating the VAT due and/or determining whether you have a valid IOSS order (i.e <= €150). Your website sends the order details to Taxamo. Taxamo debits your card account when the sale finalises for the required VAT that they need to pay to the EU. Taxamo will also bill you £2 per transaction at the end of month. The invoice that Taxamo generates is really a summary and it's not necessary to have this sent to the customer which could cause confusion.

In that situation, how can you show this payment on UK accounting.

The EU VAT amount paid to Taxamo is an expense - it's not declared as UK VAT as it isn't. The £2 Taxamo fees are billed at 0% for reverse charge as they are an Irish company.

If your EU goods orders are over €150, then IOSS cannot be used and you would need to look at DDP solutions with RM or couriers if you wanted your customers to pre-pay the import fees. Duty also applies on goods over €150, with VAT added on top.

 

[sipexa]

Thank you so much @DefinitelyMaybeUK , myVAT solution seems better for us. Really thank you.

Only my concern is, for example we have sold £100 product to Germany, and lets assume German tax is %19, and we have collected £19 VAT. myVAT or Taxamo transferred payment to German authorities.

While shipping to EU, we need to denote £19 VAT on invoice right?

And additionally, this VAT is out of scope of HMRC, do we need to create another invoice which does not include German VAT on invoice?

 

[DefinitelyMaybeUK]

Only my concern is, for example we have sold £100 product to Germany, and lets assume German tax is %19, and we have collected £19 VAT.

Don't forget you should charge VAT on the shipping too. However, the €150 threshold only applies to the intrinsic value of the order, i,e goods, and not any shipping/insurance.

While shipping to EU, we need to denote £19 VAT on invoice right?

Yes, include a line which denotes the country VAT paid. But you should similarly show the VAT to be paid during the website check-out process. It is not necessary to include any VAT figures with the customs information, both electronic and CN22.

And additionally, this VAT is out of scope of HMRC, do we need to create another invoice which does not include German VAT on invoice?

No, that would cause confusion to the customer.

 

[TeemuEAS]

For the US, there is no need to do anything special, so sell your product at the ex-VAT price, as exports are rated 0%. The import threshold for the US is high, around $800 IIRC, so if your goods value is below this limit then no taxes will be due.

For EU, if your goods value is €150 or lower, then you can use the IOSS system so the customer can pre-pay their import VAT. Duty is not applicable for €150 or lower, so no need to worry about that. Depending on your number of EU sales, you may be better to register directly via an intermediary for EU VAT, rather than use a PAYG service like Taxamo. As a rough guide number, over 1000 orders is the break even point. An intermediary is £2000+ a year - Taxamo is £2 per order. Other PAYG services are less, but may not offer the same features.

What is your website based on? Taxamo supply integrations for Magneto and an API. We use their API with no problems. Taxamo is transparent about their fees and there is no minimum orders. There is no (tedious) manual intervention required at end-of-month to submit sales data as it's all automatic.

An OpenCart extension is also available:


I'm sure they'll be other posts offering alternative services as well...

Check out RM for an overview here:



No, that's not how Taxamo works. Taxamo does not collect any payment from the customer. All customer payments are to your normal website check-out. Taxamo facilitates this transaction by possibly calculating the VAT due and/or determining whether you have a valid IOSS order (i.e <= €150). Your website sends the order details to Taxamo. Taxamo debits your card account when the sale finalises for the required VAT that they need to pay to the EU. Taxamo will also bill you £2 per transaction at the end of month. The invoice that Taxamo generates is really a summary and it's not necessary to have this sent to the customer which could cause confusion.

The EU VAT amount paid to Taxamo is an expense - it's not declared as UK VAT as it isn't. The £2 Taxamo fees are billed at 0% for reverse charge as they are an Irish company.

If your EU goods orders are over €150, then IOSS cannot be used and you would need to look at DDP solutions with RM or couriers if you wanted your customers to pre-pay the import fees. Duty also applies on goods over €150, with VAT added on top.

Taxamo operating model is "borrowing" the IOSS number - which is specifically forbidden in the EU VAT special scheme regulation. The model will not last forever, there is bound to be an action against it.

All sellers must have their own IOSS number. To have a full, unambiguous EU compliance, you really should have a look at EAS Project solution. Plugins /apps exist for Shopify, Woo and Magento. And exactly as the mentioned operator, the fee is only transaction based at 1,25€.

 

[DefinitelyMaybeUK]

"borrowing" the IOSS number - which is specifically forbidden in the EU VAT special scheme regulation

Thanks for the information - could you supply a specific *EU* link that confirms this statement?

There's the potential for abuse of the IOSS system, but that could be instigated whether the seller uses a unique IOSS number or not. The process relies on the seller entering the correct details regardless. I believe the EU are investigating the inclusion of additional (unique invoice?) data, but no implementation date as yet.

 

[TeemuEAS]

Thanks for the information - could you supply a specific *EU* link that confirms this statement?

There's the potential for abuse of the IOSS system, but that could be instigated whether the seller uses a unique IOSS number or not. The process relies on the seller entering the correct details regardless. I believe the EU are investigating the inclusion of additional (unique invoice?) data, but no implementation date as yet.

Thanks for the question! And apologies for the lenghty VAT porn
The forum does not allow me to insert a link here, so please just use google for the actual regulation. For ease, there are articles in the beginning.


From the regulation:
Article 369m
1. Member States shall permit the following taxable persons carrying out distance sales of goods imported from third territories or third countries to use this special scheme:

1. any taxable person established in the Community carrying out distance sales of goods imported from third territories or third countries;
2. any taxable person whether or not established in the Community carrying out distance sales of goods imported from third territories or third countries and who is represented by an intermediary established in the Community;
3. any taxable person established in a third country with which the Union has concluded an agreement on mutual assistance similar in scope to Council Directive 2010/24/EU and Regulation (EU) No 904/2010 and who is carrying out distance sales of goods from that third country.

Those taxable persons shall apply this special scheme to all their distance sales of goods imported from third territories or third countries.

For the purposes of point (b) of paragraph 1, any taxable person cannot appoint more than one intermediary at the same time.

1. distance sales of goods imported from third territories or third countries‘ means supplies of goods dispatched or transported by or on behalf of the supplier, including where the supplier intervenes indirectly in the transport or dispatch of the goods, from a third territory or third country, to a customer in a Member State, where the following conditions are met:
   1. the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;
   2. the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier.

The VAT directive states that it is the person that carries out distant sales of goods (i.e. makes a supply of goods, see Article 14 above) shall be entitled for the use of the special scheme. Taxamo is not acting as the merchant on record, it does not supply goods itself or on behalf of the Merchant, it does not participate in the supply of goods as an electronic interface (so Article 14a (1) is not applicable either). In the applied sense of the directive it can not then use its own IOSS for sales that are carried out by someone else.

Happy to elaborate further!

 

[DefinitelyMaybeUK]

Taxamo is not acting as the merchant on record, it does not supply goods itself or on behalf of the Merchant, it does not participate in the supply of goods as an electronic interface (so Article 14a (1) is not applicable either). In the applied sense of the directive it can not then use its own IOSS for sales that are carried out by someone else.

Thanks again for your insight. I believe this is the article you quote:

Directive - 2017/2455 - EN - EUR-Lex

eur-lex.europa.eu

There is a section for "Amendments to Directive 2006/112/EC with effect from 1 January 2021" which includes a new Article 14a, and contains in part:

1. Where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal or similar means, distance sales of goods imported from third territories or third countries in consignments of an intrinsic value not exceeding EUR 150, that taxable person shall be deemed to have received and supplied those goods himself.​

In my mind this counters your comments as Taxamo does facilitate the check-out process in their recommended implementation and is therefore compliant. It could be said that you are reading the article to meet you own objectives ?

 

[TeemuEAS]

Please do not get me wrong, I am by no measure an impartial on this

To counter the argument, Taxamo makes no claims about them facilitating sales or being an electronic interface. Nor are they the merchant of record. Not even on their checkout solution page, let alone for the standalone VAT page:

"Taxamo Assure will manage the invoicing in your existing online checkout, and file all the required VAT reporting for you. Once you integrate the solution into your checkout process, it creates the invoice including calculation of the VAT due on every line item. The VAT due on each transaction is paid directly from your customers to Taxamo."

Their description is quite far from facilitation of sales. Which, although is not defined in legislation, cannot be in any way interpreted from the description.

 

[DefinitelyMaybeUK]

To counter the argument, Taxamo makes no claims about them facilitating sales or being an electronic interface.

Yes, I agree, there appears to be no EU definition of facilitate, but Taxamo does claim to do this quite openly, despite what you say:

ReadMe

Create beautiful product and API documentation with our developer friendly platform.

docs.assure.taxamo.com

I'm sure you'll dispute their integration, but it would seem to be splitting-hairs when the key goal is to collect EU VAT correctly, which is what it allows. As I said before, even if you have a unique IOSS number, it does not prevent erroneous or lower value submissions or other forms of abuse, as I'm sure you're well aware. The only people saying that IOSS number "borrowing" is specifically forbidden is yourselves - I wonder why

 

[TeemuEAS]

I missed that document, thanks!

Integration is the problem and the use of their own tax engine, but I do agree, it is splitting hairs and can be argued. If Shopify is not the facilitator, then how would Taxamo fulfil the intended role. It is not defined - yet.

The goal of the regulation is to have VAT collected and their solution is facilitating just that.

But, as you also said: from our point of view not creating artificial roles and going exactly by the book IS beneficial to our business

Thank you for the pleasurable discussion, DefinitelyMaybe UK!