EU VAT, Customs & E-commerce Glossary

The most essential technical terms for European online business. Explained briefly and simply.

Value-Added Tax / VAT

VAT on E-Commerce

VAT rules and regulations related to online sales of goods and services, including cross-border transactions, place of supply, and registration requirements.

Place of Supply

The location where a supply of goods or services is considered to have taken place for VAT purposes, determining the applicable VAT rules for e-commerce transactions.

Distance Selling

The sale of goods or services to customers in another country via online platforms, mail orders, or telephone, subject to specific VAT rules and thresholds.

Acquisition Tax

A tax applied when goods are purchased from a supplier in another EU member state.

Distance Selling Threshold

The annual turnover limit for distance sales, determining if a business must register for VAT in the customer’s country.

E-Commerce Import VAT

VAT applied to the import of goods bought online from sellers outside the buyer’s country, collected at point of entry or through a deferred payment system.

E-Commerce VAT Compliance

Ensuring a business respects all VAT rules related to online sales, including registration, invoicing, record-keeping, and reporting.

E-Commerce VAT Fraud

Evasion of VAT in online sales, such as underreporting sales, failing to register for VAT, or operating through shell companies.

E-Commerce VAT Package

A set of EU-wide rules simplifying VAT obligations for businesses selling goods and services across the EU.

Import One-Stop Shop (IOSS)

An EU-wide VAT system simplifying VAT registration and reporting for non-EU businesses selling goods valued at €150 or less to EU consumers.

Input VAT

VAT charged on business purchases and expenses, which businesses can generally deduct against their output VAT.

Output VAT

VAT charged on sales of goods or services, which businesses must generally remit to the tax authorities.

Reverse Charge Mechanism

A mechanism that shifts the VAT liability from the supplier to the customer, simplifying VAT compliance for cross-border transactions.

Standard Rate

The default VAT rate applied to most goods and services, which varies by EU member state.

VAT Deduction

The reduction of a business’s VAT liability by the amount of input VAT it has incurred on its purchases and expenses.

VAT Exemption

A supply of goods or services that is not subject to VAT, either fully (with no right to input VAT deduction) or partially (with a right to input VAT deduction).

VAT Invoice

A document a VAT-registered business must issue to its customers, containing specific details about a VAT-liable transaction.

VAT Number

An identification number assigned to a VAT-registered business, used for VAT reporting and invoicing.

VAT Registration

The process of a business obtaining a VAT number, making it liable for VAT on its sales and eligible for VAT deductions on its purchases.

VAT Return

A periodic report submitted by a VAT-registered business to the tax authorities, detailing its output VAT and input VAT during the reporting period.

VAT Threshold

The annual turnover limit determining if a business must register for VAT in its home country or in a distance selling country.

Zero-Rate

A VAT rate of zero percent, applied to certain goods and services, allowing businesses to reclaim input VAT on related costs.

Customs

Customs on E-Commerce

Customs rules and regulations related to online sales, including import/export controls, product classification, and declaration requirements in the European Union.

Import Declaration

A document or electronic submission provided by the importer detailing the imported goods and their value, used to calculate customs duties and VAT.

Export Declaration

A document or electronic submission provided by the exporter detailing the goods being exported and their value, used for customs and VAT purposes.

Tariff Code

A numerical code assigned to products in international trade, used to determine the applicable customs duties and import VAT rates.

Customs Duty

A tax imposed on imported goods, usually calculated as a percentage of the goods’ value, paid in addition to VAT.

Customs Clearance

The process of obtaining permission from customs authorities to import or export goods, involving the submission of necessary declarations and payment of duties.

Economic Operator Registration and Identification (EORI) Number

A unique identifier required for businesses importing or exporting goods within the EU or the UK, used for customs and VAT purposes.

Customs Value

As determined by customs authorities, the value of imported goods is used to calculate customs duties and import VAT.

Customs Warehouse

A secure facility where imported goods can be stored without paying VAT and customs duties until they are removed for consumption or export.

Bonded Warehouse

A type of customs warehouse, privately operated and authorised by customs authorities, where imported goods can be stored without immediate payment of VAT and customs duties.

Incoterms

A set of standardised international trade terms that define the responsibilities of buyers and sellers in cross-border transactions, including VAT and customs obligations.

Free Trade Agreement (FTA)

An international agreement between countries that reduces or eliminates tariffs, quotas, and other trade barriers, which can affect customs duties on imports.

Transit Procedure

A customs procedure that allows goods to be transported through one or more countries without payment of VAT and customs duties until they reach their final destination.

Customs Broker

A professional who assists businesses with the customs clearance process for imported goods, including handling VAT and other tax-related issues.

Temporary Importation

A customs procedure that allows goods to be imported temporarily, without payment of VAT and customs duties, if they will be re-exported within a specific timeframe.

Import Licence

A government-issued authorisation required to import certain goods, such as pharmaceuticals, firearms, or hazardous materials.

Export Licence

A government-issued authorisation required to export certain goods, such as controlled technology, firearms, or hazardous materials.

Import Quota

A limit a government imposes on the quantity or value of a particular product that can be imported during a specific period, potentially affecting VAT and customs duties.

Export Quota

A limit a government imposes on the quantity or value of a particular product that can be exported during a specific period, potentially affecting VAT treatment.

Certificate of Origin

A document that certifies the country where the product or goods were manufactured, which can affect customs duties.

Country of Origin

The country where a product was manufactured or produced. This is a significant factor in determining customs duties and tariffs.

Customs Examination

The process by which customs officials inspect imported goods to verify their nature, origin, and value for duty calculation and regulatory compliance purposes.

Customs Union

An agreement between two or more countries to remove customs barriers and adopt a uniform system of customs duties. The EU forms a customs union.

De Minimis

Latin for “about minimal things”. In EU customs, refers to the threshold below which goods are not subject to customs duties or VAT on importation.

Preferential Origin

A status given to goods from certain countries under free trade agreements or other arrangements, which may result in lower customs duties.

E-commerce

B2B E-Commerce

Business-to-business transactions in which businesses sell goods or services to other companies via online platforms, governed by different VAT rules than B2C transactions.

B2C E-Commerce

Business-to-consumer transactions in which businesses sell goods or services directly to consumers via online platforms, subject to VAT rules and regulations.

Cross-Border E-Commerce

Online transactions involving buyers and sellers in different countries, subject to specific VAT rules and reporting requirements.

Distance Selling

The sale of goods or services to customers in another country via online platforms, mail order, or telephone, subject to specific VAT rules and thresholds.

Distance Selling Threshold

The annual sales limit that determines whether a business must register for VAT in the customer’s country for distance sales.

E-Commerce Import VAT

VAT applied to the import of goods purchased online from sellers outside the buyer’s country, usually collected at the point of entry or through a deferred payment system.

E-Invoicing

The electronic issuance and exchange of VAT invoices for goods or services, often subject to specific rules and standards to ensure authenticity and integrity.

Electronic Marketplace

A digital platform, like Amazon or eBay, that facilitates the sale of goods and services between third-party sellers and customers, subject to specific VAT rules.

Marketplace Facilitator

An online platform or marketplace responsible for collecting and remitting VAT on behalf of third-party sellers, according to specific VAT rules and regulations.

One-Stop Shop (OSS)

An EU-wide VAT system that simplifies registration and reporting for e-commerce businesses selling goods to consumers in multiple EU countries.

VAT Reverse Charge on E-Commerce

A mechanism that shifts the VAT liability in certain B2B e-commerce transactions from the supplier to the customer, simplifying VAT compliance for cross-border transactions.

Low-Value Consignment Relief (LVCR)

A VAT exemption for imported goods below a certain value threshold, no longer applicable in the EU since the introduction of the IOSS.

Digital Services

Services supplied electronically, such as software, digital media, and online services, subject to specific VAT rules in the EU.