Cross-border e-commerce –
Everything merchants need to know
Since 1 July 2021, the second stage of the so-called VAT digital package of the EU Commission applies. Here you can find out what you need to bear in mind as an online seller.
Cross-border online commerce is also referred to as cross-border e-commerce. The two terms describe the online purchase and sale of goods from abroad. This trade sector is becoming increasingly important, and Internationalisation and globalisation have made it easier for companies to sell locally and worldwide. With the entry into force of the second stage of the so-called VAT digital package of the EU Commission on 1 July 2021, several changes affected, in particular, the tax processing of goods movements.
Cross-border online trade: good opportunities in foreign markets
Cross-border e-commerce offers good opportunities for German merchants in foreign markets. Learn more about the key success factors.
Since 1 July 2021, the so-called “distance selling regulation” has applied to cross-border trade in the European Union. Since then, imports of goods have been subject to a written declaration requirement; in addition, all cross-border deliveries of goods to non-entrepreneurs are generally taxed in the destination country.
At the same time, a new delivery threshold was introduced, and it amounts to 10,000 EUR and refers to sales within the EU member states. For cross-border EU sales of more than EUR 10,000 within one year, online merchants must register for VAT in all countries they deliver their goods.
The EU One-Stop-Shop (OSS)
With the introduction of the One-Stop-Shop (OSS) as part of the EU VAT reform, numerous changes came into force for internet trade. The One-Stop-Shop refers to the central processing of all VAT reporting and payment obligations arising from trade in goods with consumers in the EU-27 in a single tax return. The use of this scheme requires that the merchant registers for it. In Germany, the Federal Central Tax Office (BZSt) is the competent authority for this.
The EU Import One-Stop Shop (IOSS)
For e-commerce sellers and online marketplaces, the newly introduced Import-One-Stop-Shop (IOSS) VAT procedure is also of great importance. The IOSS special regulation applies to trade in goods with non-EU countries.
The IOSS scheme, which applies in all EU Member States, allows online merchants to submit their IOSS-eligible transactions to a central office in a single tax return. Merchants participating in the IOSS scheme are exempt from import VAT on IOSS-eligible sales.
Correct application of VAT rates
Many merchants use the same product price when selling to other EU member states to simplify their processes. However, VAT rates for products in the EU vary.
Online merchants can go to several places to determine the correct tax rates. On the one hand, the information can be obtained from the tax authorities in the country of delivery, or the EU database “TEDB” can be used. However, both are very time-consuming, and the databases are not always up-to-date.
Calculate your VAT optimisation potential
When trading across borders in the EU, merchants face the problem of determining the correct VAT rates for their products – applying the correct VAT rate leads to customer satisfaction, compliance and increased sales.
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A VAT database for your entire product portfolio
VATRules knows all the VAT rates you need to calculate in the 27 member states of the EU and the UK. These are assigned to the product groups so that the VAT assessed is always high enough. By applying the correct VAT rates, including the reductions and exemptions in each country, you not only comply with the applicable regulations but can also increase your sales.
Trade with the United Kingdom after Brexit
Since the Brexit referendum on the UK’s (England, Scotland, Wales, and Northern Ireland) exit from the EU, completed on 1 January 2021, there have been many changes in e-commerce. Cross-border goods shipments to the UK are no longer subject to the European VAT system directive. The changes affect foreign online retailers and online marketplaces in particular. These include the obligation to register for VAT in the UK and some new regulations under customs law, as the UK is considered a third country from the perspective of the EU single market.
Since Brexit, the same rules have applied between the European Union and the United Kingdom as between the EU and other non-EU third countries. To be allowed to trade with the UK, merchants must first register.
The United Kingdom left the European Single Market and the Customs Union on 31 December 2020 as part of the so-called Brexit. Find out how the new agreement will affect e-commerce with Great Britain and Northern Ireland.