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eCommerce and VAT (8)

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***Information stated below relates to businesses engaged in eCommerce activities, registered for VAT and incorporated in a particular EU state. It is also important that the goods are physically present in any of the EU states***

Below is a quick overview of the EU VAT rules regarding eCommerce businesses:

Sale of goods to private individuals in another EU state (B2C sales):

If you are a VAT registered business in your home country (EU state) then you will only charge your home country VAT rate on the sales across all the EU states. However an important condition is that the total amount of sales in a EU state should be below the distance selling VAT registration threshold of that particular EU state.

If your sales are more than the distance selling VAT registration threshold of a particular state then you will have to register for VAT in that EU state separately as a non-resident and should charge that particular EU state VAT rate on respective sales.

Sale of goods to business customers in another EU state (B2B sales):

If you are selling goods to a VAT registered business customer in another EU member state then the sales would be zero rated and you would not charge any VAT on the sale. However it’s important to verify the VAT number of the business first before zero rating the sales.

A zero rated sale does not mean that you are unable to claim back any input VAT incurred on the business purchases/expenses. You can still claim the input VAT

Please also note that, in this case, each member state has a strict VAT invoicing requirement and it is essential that a proper VAT invoice is raised as per the rules otherwise the zero rate claim could be rejected and you may end up giving up a portion of your sales for VAT.

Sale of goods to customers outside the EU:

If you are selling goods to customers outside the EU, no VAT would be charged and it will be considered as a zero rated sales. However again, as explained above, you can still claim for the input VAT on business purchases/expenses that you have incurred in your home country's VAT return.

It is important that you retain an evidence/proof of export which confirms that the goods have been removed from the state and went outside the EU.

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Your post is really enlightening and helpful. Thanks Digitas!



LeadCloak

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Beyond this info, here are the variables that matter most:
- where are your goods located?
- where do you sales take place and in which volume?

Example:
If you have 2 warehouses, 1 in Germany and 1 in France and you sell to Italy from both warehouses and you are above the threshold, you will need 2 Italian VAT numbers. One for your German stock, one for your French one.
And you'll also need to report stock moves between the warehouses.

If this sounds confusing, the only thing I can say is to talk to an expert about these things that can give yout tailored advice to your specific situation. That's the best way forward when you do serious volume to multiple countries.

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Above is just an overview of the general VAT rules. There are a lot of variables to be considered so a proper tax advice is extremely essential here.

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Thank you for the information. We are looking to setup an e-commerce store outside of India since its a nightmare to make payments to suppliers from India. We were contemplating between HK and Dubai and we were told in HK, we can withdraw money from Paypal and stripe in USD and not in Native currency. This can be a huge benefit since we wouldnt have to convert the currency back to USD to make payments. What country do you recommend the most for ecommerce operations?

PS: We are Indian nationals holding Indian passports.

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Both incorporation cost and running cost is a lot cheaper in HK then in Dubai. The challenge with HK is that it's practically impossible to get a bank account for your company.

HK Bank have to much cash. It is not really hard to find banks outside HK to use. Singapore Banks is easy but often demands maintaining more than $10000 on the account. Just Google for banks alternative.

Dubai have higher fees but simpler to find an agent that handles it all including bank recommendation.

Many HK agents will tell you HK banking is simple. Be very sceptical. Good luck.

Sent from my ONEPLUS A5000 using STM Forums mobile app

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Also check out Stripe Atlas. It is created for your situation.
https://stripe.com/atlas


Sent from my ONEPLUS A5000 using STM Forums mobile app

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Paypal and Stripe offer the account setup in USD as a base currency in Dubai as well. However company setup costs in Dubai are higher compare to HK. But opening a bank account in HK is becoming quite tough now a days and Dubai is relatively easy.

Depending on your business profitability a Dubai setup may work very well for you.

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