Parcels delivering EU VAT registration problems

28 October 2015

Ian Carpenter

Businesses - particularly e-tailers selling and delivering goods to EU consumers – could soon have to register and account for VAT in the member state of their customers.

Suppliers of e-services to EU customers have been faced with numerous VAT accounting problems this year, primarily because the MOSS system doesn't have a registration threshold. But suppliers of goods do benefit from an exemption from overseas VAT registration when their supply of goods to any one member state is below a ‘distance selling’ threshold of €100,000. 

To avoid VAT registration in their customer’s country, many businesses split the value of their supplies, with the value of goods accruing towards the registration threshold, and the cost of delivery being ignored for VAT registration purposes. However, the UK and Belgian tax authorities have recently indicated that this ‘unbuckling’ of goods and delivery costs should be prohibited.

The EU VAT Committee agrees and has issued guidance stating that the distance selling threshold should take account of both the value of the goods and the delivery costs in any cases where the supplier intervenes directly, or indirectly, in the delivery of those goods.

This means that, for the delivery of goods to be excluded from distance selling thresholds, the customer must transport the goods themselves or arrange the delivery with a third party. 

If member states adopt this guidance, e-tailers will have to consider any delivery costs passed on to their customers as they may now have to register for, and charge VAT in the customer’s country. There’s also the potential of double taxation arising from member states’ differing statutes of limitation. If, for example, the German tax authorities insist on seven years backdated VAT on supplies to German customers, there could be double taxation if the UK authorities aren’t prepared to reverse out VAT incorrectly charged on these supplies for the same period.

Next year it’s expected the MOSS system will be extended to cover the sale of tangible goods. Hopefully lessons have been learned from the implementation of MOSS to e-services, and that distance sales registration thresholds, even if these have to include delivery costs, are maintained.