VAT Preparation: Selling Online from the UK into the EU

Expanding your online business from the UK to the EU presents exciting opportunities, but it can also introduce complex VAT obligations.

We put this guide together with help from the VAT experts at 1stopVAT to help you navigate VAT preparation as you think about expanding your UK-based online store into the EU. Whether you’re thinking about selling on a new Amazon marketplace or growing your Shopify store, we’ve got you covered!

You can also get a walkthrough of the important VAT details you need to know by watching our webinar recording where 1stopVAT explains EU VAT preparation essentials for UK sellers.

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Key steps for EU VAT preparation when selling online

Important note: This list includes the general VAT compliance steps you should take if you’re thinking about selling from your UK-based online store into the EU. However, every business is different, and we strongly recommend getting in touch with an expert (such as 1stopVAT) to ensure you understand your VAT obligations.

1. Determine the type(s) of goods you are selling

This might seem obvious – if you’ve already set up your online store in the UK, you likely have a clear understanding of the product(s) you’re selling and your VAT obligations in the UK.

However, it’s crucial to evaluate the products you sell and conduct thorough research to understand how VAT applies to them, especially when expanding into the EU market.

Here are some key areas to investigate:

Are you selling physical goods, digital goods, or a combination of both?

• Physical goods: Tangible products shipped to the customer.
• Digital goods: Intangible items such as software downloads, cloud-based services, or digital content.
• VAT obligations in the EU vary widely between physical and digital goods – e.g., for physical goods, you’ll have to consider where you store inventory (more about this below).

Applicable VAT rates for physical goods

• If you’re selling online via Amazon or Shopify, you’re likely selling physical goods. Do some research to understand the VAT rates applicable to your product type in different EU countries.
• VAT rates can vary significantly for the same product across member states, so it’s essential to identify the correct rates for each destination.

2. Are you selling via an online marketplace or an online store?

VAT obligations vary significantly based on your sales channel or platform.

Online marketplace

• Selling on an online marketplace means you’re selling via Amazon, eBay, Etsy, or a similar site where you set up a shop and have access to a marketplace of customers.
• When you sell via an online marketplace, VAT compliance for many B2C sales will be handled by the platform – e.g., Amazon will often collect and remit VAT on your behalf (often known as “Marketplace Facilitator VAT”).
• However, you still have important VAT obligations when you sell via an online marketplace:
  • Not all VAT will be collected and remitted by Amazon, Etsy, or eBay, etc.
  • You are still responsible for reporting on the VAT that Amazon/Etsy/eBay, etc. has collected and remitted on your behalf (A2X can help with this!)

Online store

• Selling on an online store means that you’re selling via Shopify, or a similar channel that allows you to fully set up and manage your own store.
• When you sell via an online store, you are fully responsible for VAT compliance, including registration, collection, and remittance.

3. How will your products be shipped to the EU?

The location where you’re storing your inventory and how your products will be shipped to the EU will also impact your VAT obligations.

Bulk import and EU storage

• If you’re storing goods in an EU country, VAT registration in that country is mandatory before import.
• You will also need to obtain an Economic Operators Registration and Identification (EORI) number to reclaim import VAT.

Direct shipment from the UK

• For low-value goods (€150 or less), you will be eligible to register for the Import One-Stop Shop (IOSS) scheme.
• Make sure you are collecting VAT at the point of sale based on the customer’s location. (Online marketplaces may take care of some or all of this for you.)

4. Understand your VAT obligations and register for VAT

If you’ve followed steps 1-4, you will have the key information you need to understand your VAT obligations and register as applicable.

Standard VAT Registration

• Required if you store goods in an EU country.
• VAT is generally collected based on the country of arrival.
• Standard VAT registration can be complicated and take time in some countries – be sure to factor this into your selling plan.

One-Stop Shop (OSS) Scheme

• Simplifies VAT compliance for cross-border sales within the EU.
• Allows businesses to report all EU VAT in a single return from one member state.

Import One-Stop Shop (IOSS) Scheme

• For direct sales of low-value goods from the UK to EU customers.
• Enhances customer satisfaction by pre-collecting VAT.

5. Prepare your online store and/or marketplace account

Now that you understand your VAT obligations and have registered as applicable, you’re just about ready to start selling into the EU.

In your sales platform (e.g., Amazon, Shopify, etc.):

• Ensure correct VAT rates are applied to your products based on the destination country.
• Provide accurate company and VAT registration details to avoid account suspension.

6. Prepare your accounting and submit your VAT returns

Understanding where you need to register for VAT is an important step, but remember that you also have ongoing VAT obligations.

• Make sure you are recording VAT collected and paid in your bookkeeping.
• Use tools like A2X to automate VAT calculations, split liabilities by jurisdiction, and reconcile transactions efficiently.
• Regularly file VAT returns for each EU country where you are registered.

Common EU VAT mistakes (and how to avoid them)

It’s important to thoroughly research and prepare when expanding your sales into other countries. Here are some common mistakes to avoid when it comes to VAT preparation.

1. Failure to register for VAT before importing goods

Issue: Sellers often start importing goods into the EU without registering for VAT in the destination country. (This is an especially common mistake among Amazon FBA sellers.)

Consequence: Businesses can be penalised, and will lose the ability to reclaim import VAT, which can significantly impact cash flow.

Solution: Obtain VAT registration and an EORI number before moving goods into the EU.

2. Lack of preparation for marketplace-specific VAT requirements

Issue: Sellers using platforms like Amazon FBA may not realise that storing stock in multiple EU countries requires VAT registration in each country.

Consequence: Delays in sales or account suspension due to non-compliance.

Solution: Prepare for multi-country VAT registrations if using FBA or similar storage programs.

3. Underestimating the registration process timeframe

Issue: Sellers often assume VAT registration in the EU is quick and straightforward.

Consequence: Delays in starting sales due to lengthy registration processes in some countries.

Solution: Plan registrations well in advance of sales activities.

4. Not factoring in country-specific requirements

Issue: Sellers often neglect the unique requirements of each EU country (e.g., language translations, notarised documents).

Consequence: Delayed or rejected VAT registrations.

Solution: Work with VAT experts who are familiar with country-specific regulations.

5. Incorrect setup of your online store or marketplace account

Issue: Discrepancies between VAT registration details and account information on platforms like Amazon can cause issues.

Consequence: Accounts can be blocked if the company name, address, or VAT numbers don’t match official documentation.

Solution: Ensure all your sale channel accounts are set up to correctly collect VAT across applicable EU countries, and ensure account details align with VAT certificates and company incorporation documents.

6. Misapplication of VAT rates

Issue: Sellers may apply incorrect VAT rates, particularly when selling diverse products to customers in multiple EU countries. While most sales channels have features that can help with this, it’s still important to research the correct VAT rates and ensure you have your store correctly set up to collect VAT.

Consequence: Risk of undercharging or overcharging VAT, leading to penalties or customer dissatisfaction.

Solution: Research and apply the correct VAT rates for each product type in the destination country.

7. Assuming OSS/IOSS covers all VAT liabilities

Issue: Some sellers mistakenly believe that registering for the OSS or IOSS scheme eliminates the need for standard VAT registrations.

Consequence: Non-compliance in countries where stock is stored or where OSS/IOSS doesn’t apply.

Solution: Understand the scope of OSS/IOSS and register for standard VAT where required.

8. Overlooking VAT compliance for direct sales

Issue: Sellers shipping directly from the UK to EU customers may not register for IOSS for low-value goods or manage VAT correctly for high-value goods.

Consequence: Delays at customs or unexpected charges for customers.

Solution: Register for IOSS for low-value goods and decide whether the seller or customer will act as the importer for high-value goods.

9. Ignoring VAT liabilities for B2B transactions

Issue: While marketplace platforms handle VAT for B2C sales, B2B sales may still require the seller to remit VAT.

Consequence: Non-compliance or underreporting VAT liabilities.

Solution: Track and report B2B transactions separately, ensuring VAT compliance.

Tools and services to simplify VAT compliance

VAT compliance is complicated. Fortunately, there are tools and services that can help make it easier.

A2X

• Automates VAT categorisation and reconciliation.
• Splits sales by jurisdiction, tax rate, and product type.
• Provides accurate financials and audit-ready data.

1stopVAT

• Offers global VAT registration and compliance services.
• Handles VAT returns and consulting tailored to your business needs.
• Acts as a single point of contact for multi-country VAT compliance.

Selling from the UK to the EU can unlock significant growth opportunities, but only if you manage VAT compliance effectively. By understanding your obligations, leveraging the right tools, and preparing thoroughly, you can streamline your expansion while staying compliant.

Need support? Contact 1stopVAT for expert VAT compliance guidance or A2X to automate your accounting. Together, these tools can help you navigate the complexities of cross-border selling with confidence.