What are the differences when you sell to customers located inside the EU or outside the EU?

There are 2 types of customers when you are selling goods online to private consumers – those within the EU and those outside the EU.

Inside the EU

Let us set the scene, you are doing really well as an Amazon Seller i.e. in the UK, then Amazon approaches you and asks if you would like to sell in mainland Europe, they can extend your shop’s exposure to 3 or 4 countries inside the EU.

Logistically nothing changes, you send your goods to their UK fulfillment centre and they do the rest. Great – you start getting French and German customers.. Should you worry about adding VAT? The answer is YES.

By selling to private consumers in Europe, you are now governed by the EU Distance Selling Rules. These rules apply to you even if you are sole trader, a limited company, or an individual selling online.

These rules state that you charge UK VAT on any EU sales to private consumers until you exceed set thresholds set by the different countries. The thresholds for most EU countries is only 35,000.00 EURO or equivalent, except for France, Germany, Luxembourg and the Netherlands – whose thresholds are 100,000.00 EURO.

Once your sales (include delivery costs in the calculation) reach the thresholds in any country, you have an obligation to VAT register there and comply with the ensuing VAT return requirements. Failure to do so will and does lead to interest and penalties being applied.

If you are not VAT registered here in the UK, you don’t charge VAT. Though you do have to monitor your EU sales as if you do exceed the threshold in another country you will have to VAT register there (even though you are below the UK threshold here) and charge that country’s VAT on those sales.

Also, be aware that a different VAT rate may apply, for example, in the UK, children’s clothing is zero-rated, whereas elsewhere in the EU, it may attract a country’s standard rate.

VAT rates range from 17% (Luxembourg) to 27% (Hungary) across the EU – again, accounting for the variations within your margins from the start can ensure you remain competitive in every country.

Outside the EU

If you get customers outside the EU, as long as you can prove the export happened, you do not charge VAT on that sale.