How distance selling thresholds work?

For example, if you are based in France with a French VAT registration number, you sell your goods to French consumers at 20% French VAT.

If you start selling to Germany and Spain, and your sales are below their registration thresholds, then you sell to the consumers there at 20% French VAT and pay the collected VAT to the French tax authorities. Once you go over the country limits (Germany €100,000; Spain €35,000 per annum) you must register your French company with the tax authorities in Germany and Spain. They will give your French company German and Spanish VAT numbers. In tax terminology, you have become a ‘non-resident’ trader or entrepreneur. You must then start charging your German and Spanish consumers 19% and 21% VAT, respectively, and remitting it to the local tax authorities.

In summary

• Any non-EU business selling goods within the EU will need to register in the country in which they hold goods,
• Any EU business that has breached their local VAT registration threshold will need to register locally,
• Any EU business that has breached the distance selling threshold in another EU member state will need to register in the destination country in which the threshold was breached,
• Any non-resident EU business storing goods in, and selling goods from another EU member state will need to register in the country where the goods are held.