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Glossary –
Tax, Customs & Online Marketplaces

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

 

Value Added Tax (VAT)
An indirect tax levied on the consumption of goods and services added at each stage of the production and distribution process.
VAT Registration
The process by which businesses register with the tax authorities to collect, report, and pay VAT on taxable supplies.
VAT Rates
The different percentage rates applied to taxable goods and services depending on their category.
VAT Threshold
The annual turnover limit determines whether a business must register for VAT.
VAT Return
A periodic report submitted by VAT-registered businesses, summarising VAT charged on sales and paid on purchases.
VAT Invoice
A document issued by a VAT-registered supplier detailing VAT information for a transaction, including VAT rates and amounts.
Input VAT
The VAT paid on goods and services purchased for use in the business.
Output VAT
The VAT charged on the goods and services a business supplies customers.
VAT Exemption
A category of goods or services not subject to VAT.
VAT Zero Rating
A category of goods and services subject to a 0% VAT rate.
VAT Refund
A repayment of overpaid or reclaimable VAT.
VAT Flat Rate Scheme
A simplified accounting scheme that allows small businesses to pay VAT as a fixed percentage of their turnover.
Reverse Charge
A mechanism that shifts the VAT liability from the supplier to the customer in specific situations.
VAT Taxable Supply
A supply of goods or services subject to VAT.
VAT Liability
The amount of VAT a business owes to the tax authorities.
VAT Deregistration
The process of cancelling a VAT registration when a business no longer meets the VAT registration requirements.
VAT Period
The specific time interval for which a VAT return must be submitted, usually quarterly or monthly.
VAT on Imports
VAT applied to goods brought into a country from abroad.
VAT on Exports
Goods and services sold to customers in another country, usually zero-rated.
VAT on Services
VAT applied to services provided by businesses.
VAT on Goods
VAT applied to tangible products supplied by businesses.
VAT Compliance
Ensuring a business follows all VAT regulations, including registration, invoicing, record-keeping, and reporting.
VAT Penalties
Fines or sanctions imposed on businesses for non-compliance with VAT regulations.
VAT Inspection
An examination of a business’s records and systems by tax authorities to ensure VAT compliance.
VAT Accounting
Record, report, and pay VAT transactions in a business’s financial records.
VAT Deduction
The process of reclaiming input VAT paid on business expenses.
VAT Margin Scheme
A special scheme that allows VAT-registered businesses to calculate VAT based on the difference between the selling price and purchase price of certain goods.
VAT Number
A unique identifier assigned to VAT-registered businesses for tax purposes.
EC Sales List
A report submitted by VAT-registered businesses detailing supplies of goods and services to VAT-registered customers in other EU countries.
VAT on Digital Services
VAT applied to electronically supplied services, such as software, digital content, and online courses.
VAT on E-Commerce
VAT rules and regulations related to online sales of goods and services.
VAT on International Trade
VAT regulations governing cross-border transactions, including imports, exports, and intra-community supplies.
VAT on Second-hand Goods
Special VAT rules and schemes for businesses trading in used items, such as the Margin Scheme.
VAT on Financial Services
VAT rules for financial institutions and services are typically exempt from VAT.
VAT on Transport
VAT rules apply to transportation services, such as passenger transport, freight, and vehicle hire.
VAT on Imports
The value-added tax applied to goods brought into a country from abroad, collected at entry or through a deferred payment system.
Customs Duty
A tax imposed on imported goods, usually calculated as a percentage of the goods’ value, paid in addition to VAT.
Import VAT Deferral
A system that allows businesses to defer VAT payment on imported goods, usually until their next VAT return.
Import Declaration
A document or electronic submission provided by the importer detailing the imported goods and their value, used to calculate VAT and customs duties.
Tariff Code
A numerical code assigned to products in international trade, used to determine the applicable customs duties and import VAT rates.
Intrastat
A statistical report submitted by businesses within the EU that records the movement of goods between EU member countries, used for VAT and trade analysis.
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.
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.
Free Trade Agreement (FTA)
An international agreement between countries that reduces or eliminates tariffs, quotas, and other trade barriers, which can affect VAT and customs duties on imports.
Importer of Record
The entity responsible for ensuring that imported goods comply with all regulations, including payment of VAT and customs duties.
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.
Postponed VAT Accounting (PVA)
A system that allows businesses to account for import VAT on their VAT return rather than paying it at the point of entry.
Tax and Duty Deferment Account
An account with the customs authority that enables businesses to defer payment of VAT and customs duties on imported goods for a specified period.
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.
Preferential Origin
A status granted to goods originating from countries with preferential trade agreements may result in reduced or eliminated import VAT and customs duties.
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.
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.
Distance Selling Threshold
The annual turnover limit determines whether a business must register for VAT in the customer’s country for distance sales.
Electronic Marketplace
A digital platform, such as Amazon or eBay, 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, as per specific VAT rules and regulations.
Digital Services
Electronically supplied services, such as software, digital content, and online courses, subject to specific VAT rules in e-commerce.
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.
Cross-Border E-Commerce
Online transactions involving buyers and sellers in different countries are subject to specific VAT rules and reporting requirements.
B2C E-Commerce
Business-to-consumer transactions in which businesses sell goods or services directly to end consumers via online platforms, subject to VAT rules and regulations.
B2B E-Commerce
Business-to-business transactions in which businesses sell goods or services to other companies via online platforms, subject to different VAT rules than B2C transactions.
Import-One-Stop-Shop (IOSS)
An EU-wide VAT system for non-EU businesses selling goods valued at €150 or less to EU consumers, simplifying VAT registration and reporting.
E-Invoicing
The electronic issuance and exchange of VAT invoices for goods and services, often subject to specific rules and standards to ensure authenticity and integrity.
E-Commerce VAT Package
A set of EU-wide rules and regulations to simplify and harmonise VAT obligations for online businesses selling goods and services across the EU.
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.
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.
Customs Value
As determined by customs authorities, the value of imported goods is used to calculate customs duties and import VAT.
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.
Preferential Origin
A status granted to goods originating from countries with preferential trade agreements may result in reduced or eliminated import VAT and customs duties.
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.
Authorised Economic Operator (AEO)
A certification granted to businesses that demonstrate a high level of customs compliance and supply chain security, offering various benefits in customs procedures and simplifications.
Customs Compliance
Ensuring that a business respects all customs rules and regulations related to the import and export of goods, including declaration, classification, and payment of duties.
Customs Audit
An examination conducted by customs authorities to assess a business’s compliance with customs rules and regulations, potentially leading to fines, penalties, or adjustments to duty payments.
Customs Penalties
Fines, sanctions, or other punitive measures imposed by customs authorities on businesses that violate customs rules and regulations.
Excise Duty
A tax imposed on specific goods, such as alcohol, tobacco, and fuel, usually collected at the point of production or importation and in addition to VAT and customs duties.
Export Controls
Government regulations that restrict or control the export of certain goods, technologies, or services, often for reasons of national security or foreign policy.
Import Controls
Government regulations that restrict or control the import of certain goods, technologies, or services, often for reasons of public health, safety, or environmental protection.
Customs Ruling
A binding decision issued by customs authorities to a specific importer or exporter, providing guidance on the classification, valuation, or origin of goods for customs purposes.
Harmonized System (HS) Code
An international classification system used to assign a unique code to products in international trade, used to determine customs duties and import VAT rates.
Country of Origin
The country where a product was wholly obtained or produced, or where its last significant transformation took place, as determined by customs authorities for tariff and trade purposes.
Customs Declaration
A document or electronic submission provided by the importer or exporter detailing the goods and their value, used for customs and VAT purposes.

 

Disclaimer: Explanations on the terms are very condensed and may not be complete.