Note: These FAQs are intended to give an overview of some of the key obligations when importing goods into the EU. They are not intended to be a comprehensive guide to importing nor tax advice. If you are unsure of your obligations, we recommend that you seek advice from either the applicable tax authority or an independent tax advisor.
What is VAT?
If you sell goods in any EU country, it’s likely you may be required to register for Value Added Tax (VAT) in each country you sell in. VAT is a tax on consumer expenditure. It is collected on business transactions, imports, and moving goods between EU countries.
How do I know if I need to register for VAT in the EU?
Whether you need to register for VAT in an EU member state depends on the way you conduct your business.
The key factors that determine if you have an obligation to register for VAT are:
- Your business’ country of establishment
- The location of your inventory
- Your level of sales
What are the consequences of non-compliance with the obligation to register for Value Added Tax (VAT) in the EU?
All EU member states operate a VAT system. The failure to comply with the VAT registration requirements within the EU has serious consequences:
Typically you have to pay the VAT which you should have paid to the appropriate (EU) tax authorities, plus interest on the VAT from the date it should have been paid. This is normally from the date you should have obtained a VAT registration number, accounted for VAT on your sales and remitted VAT to the tax authorities (despite not charging VAT on your sales during this time).
If the tax authorities become aware that you have failed to VAT register when required to do so, you will likely have to pay a financial penalty. The amount of the penalty will typically depend on the amount of VAT due and the length of time you failed to meet your registration obligations. Late registration penalties are generally a percentage based on the VAT amount that should have been remitted to the tax authorities. The ways in which penalties are calculated differ by member state. In the UK, for example, penalties are calculated on the basis of the length of time which has passed since you should have first registered for VAT and range from 5% to 15% of the VAT due.
In the event that Whiplash receives confirmation that you have failed to comply with your obligations to register for VAT, your account will be suspended until such time you have demonstrated VAT compliance and that this is evidenced by the appropriate tax authorities.
Customs Duty and Import VAT
How do I know if I need to pay customs duty and import VAT when importing goods into the EU?
Goods which are imported into the EU from territories outside of the EU are subject to customs duty and import VAT.
What is Customs Duty?
Customs Duty is payable on the import of goods from outside the EU into an EU member state and can range from 0% to 25%. There are different rates of customs duty for products based on different HS commodity codes as well as the origin of the goods. The applicable rate will then apply to the valuation of the goods declared to the customs authorities. This valuation (commonly referred to as the Customs Value) includes all costs up to the point at which the goods enter into the EU.
Customs Duty is generally irrecoverable and represents a hard cost.
What is Import VAT?
Import VAT is also payable on the same importation of goods from outside the EU into an EU member state. The rate of VAT due at import will be the same as would apply were the goods supplied within the EU country of import. Import VAT is payable in addition to any Customs Duty which is due, and is calculated on the Customs Value of the goods plus Customs Duty.
Import VAT is normally recoverable provided you are registered for VAT in the country where the goods are declared to the customs authorities. This is achieved via your VAT return in accordance with the normal VAT recovery rules in that country.
Under EU rules, goods which are imported from outside the EU into an EU member state may be exempted from import VAT where the goods are of a low value. The thresholds under which the goods must fall in order to qualify range from €10 to €22 per commercial good/parcel, depending on the member state into which the goods are being imported.
The relevant import value will generally be the transaction value (i.e. sales price to the customer) plus certain additional cost elements. Consequently, it is important to note that any such relief, in general, does not apply to the import of low value goods which have not yet been sold to a customer but are (bulk) imported for subsequent sale to customers in the EU.
Low Value Consignment Relief
In the UK this relief is known as low value consignment relief or LVCR. If you think you might qualify for this relief we recommend that you consult with either the applicable tax authority or an independent tax advisor to confirm.
Single Administrative Document (SAD)
When goods imported from a non EU country arrive at the EU border, a declaration must be made to the relevant customs authorities. This declaration is called a Single Administrative Document (SAD)/Form C88. Some importers use a third party freight agent to submit the SAD/Form C88 electronically on their behalf. You can find a copy of a SAD / Form C88 here.
The SAD / Form C88 must include information such as:
What the goods are;
The value of the goods;
Where the goods are from;
The consignor (the person from whom the goods are being sent);
The consignee (the person to whom the goods are being sent);
The declarant (either the importer or the third party freight agent, if one has been used).
Any Customs Duty and import VAT will need to be paid outright at the time of importation, unless the importer or the third party freight agent is using an alternative means of payment approved by the tax/customs authorities.
HMRC (Her Majesty's Revenue and Customs) have published guidance on importing goods into the UK, which is available here.
Issuing a UK VAT Invoice
If you are required to issue a UK VAT invoice, it must legally hold a minimum level of information. This information, as shown on the HMRC website, is as follows:
a sequential number based on one or more series which uniquely identifies the document
the time of the supply (tax point)
the date of issue of the document (where different to the time of supply)
your name, address, and VAT registration number (you may issue invoices under a trading name, but your legal name and address details must still be shown somewhere on the document)
the name and address of the person (consumer) to whom the goods or services have been supplied
a description sufficient to identify the goods or services supplied
for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency
the gross total amount payable, excluding VAT, expressed in any currency
the rate of any cash discount offered
the total amount of VAT chargeable, expressed in sterling
the unit price
the reason for any zero rate or exemption
When do I charge VAT on my invoice to UK consumers?
If you are VAT registered and sell goods in the UK, you will be required to charge UK VAT to your customers. This is referred to as your output VAT.
If you sell to a B2B customer in the UK, you will be required to issue a VAT invoice. If you sell to B2C consumers, you are not legally obliged to issue a VAT invoice for domestic supplies in the UK, but it is common practice to provide one when requested. In case of distance selling to UK B2C consumers (from an inventory in another EU Member State), a VAT invoice is always needed.
The VAT you collect on your sales is declared to HMRC by way of a VAT return, which is normally submitted on a quarterly basis. The amount of VAT due to HMRC can be offset by the VAT you incur on your purchases/costs (i.e. where you have been charged UK VAT, including import VAT). This is referred to as input VAT. The amount of VAT payable to HMRC is the net value of your output VAT less the amount of input VAT which is recoverable.
This is a very general overview and we recommend you consult a tax advisor regarding the preparation and submission of your VAT returns.
How is VAT charged and reimbursed?
In order to charge VAT, you must first be registered for VAT and obtain a VAT number (please see section below regarding VAT registration requirements).
Once you are VAT registered, you are bound by the VAT rules applicable to the country in which you are registered, but it normally means that you must charge VAT (where applicable) on your sales and show this VAT on a VAT invoice (please consult your tax advisor for specific advice regarding invoicing requirements).
The amount of VAT due to a local tax authority (i.e. charged to your customers) can be offset by the VAT which is incurred on your business purchases/costs (please consult a tax advisor regarding which costs can be recovered). For example, where you have been charged UK VAT on a purchase, including import VAT, you can offset this VAT against the VAT due on your UK sales on a UK VAT return.
The amount of VAT payable to the tax authority is the net value of your UK output VAT less the amount of UK input VAT which is recoverable.
Please note that you should check VAT reporting and invoicing requirements in each country in which you register. Although these requirements are similar, there can be notable differences.
What is the level of the VAT rates?
Given that EU law only requires that the standard VAT rate must be at least 15% and the reduced rate at least 5%, actual rates applied vary between EU countries and between certain types of products. In addition, certain EU countries have retained separate rules in specific areas.
The most reliable source of information on current VAT rates for a specified product in a particular EU country is that country's VAT authority. It is possible that you will need a tax advisor to help you in determining the VAT rate to be applied.
Generally, how do I go about asking for a VAT number in EU?
When you sell your products in the EU, you may need to charge VAT. If so, you will need to request a VAT registration number, file VAT returns, and pay the VAT you collected from your customer to the tax authorities.
In many EU countries, you can register online on the tax authority's website for the country where you want to register. The majority of these websites provide the VAT information in English. The website will usually provide an online form for registering or a PDF form you can download to complete and return by mail. If there is no provision for registering online, you can find out where to go to register for a VAT number. After you have submitted your request for a VAT number, you may also be sent forms to sign and return through regular mail.
Registering for VAT may lead to a number of associated compliance requirements, including the need to file reports and issue VAT invoices.
How do I charge VAT on my invoice to Non-UK B2C consumers?
If you make distance sales from an inventory in the UK to B2C consumers in other EU countries (for example, sell from the UK to another EU country), and do not already have a VAT registration in the ship-to country, you are required to charge UK VAT. In these circumstances, you must charge and account for VAT using the same method as for domestic sales (see above section). Please note that you must always issue a UK VAT invoice for distance sales from the UK which are subject to UK VAT.
However, if you exceed the distance selling threshold in another EU country, you will be required to register for VAT in that country. This means you should no longer charge UK VAT on these types of sales into that country; instead, you should charge the VAT of the ship-to country.
For example, if you store goods in the UK and start selling those goods to B2C consumers in France, you must charge UK VAT. As soon as it is clear you will exceed the distance selling threshold in France, you must submit a French VAT registration application to the French tax authorities and you will be required to charge French VAT on B2C sales to France (i.e. issue French VAT invoices and submit French VAT returns).
Under distance selling, you can also opt to tax your sales in the ship-to country (before you exceed the distance selling threshold). As soon as such option has been made, the VAT of the destination country needs to be collected (instead of the UK VAT) and that country’s invoice requirements will apply.
If you store goods in the consumer’s EU country prior to the sale, this is not considered to be distance selling. For example, if you sell to French consumers and supply those consumers with goods which are already stored in France, you will be making a domestic sale in France and will need to consider your VAT registration position in France.
How do I charge VAT on my invoice to Non-UK B2B consumers?
If you sell to B2B customers in another EU country, you are not required to charge VAT if a number of conditions are met. In the UK, these conditions, as set out on the HMRC website, are as follows:
A supply from the UK to a customer in another EU country is liable to the zero rate where:
You obtain and show on your VAT sales invoice your customers’ EU VAT registration number, including the 2-letter country prefix code.
The goods are sent or transported out of the UK to a destination in another EU country.
You obtain and keep valid commercial evidence that the goods have been removed from the UK within the time limits set by HMRC.
There are a number of other conditions which must be met (for example, additional specific invoicing requirements) and therefore we recommend you consult a tax advisor prior to making sales to B2B customers in another EU country.
There is also a requirement to submit further supporting documents such as an EC Sales List (periodic report to be submitted to HMRC, listing total EU cross border sales from the UK to VAT registered customers in other EU country).
What is the process for claiming UK VAT back?
Once you are VAT registered, if you incur UK VAT which relates to your business activities, you can recover this VAT by way of your VAT return (i.e. the VAT incurred on your purchases/costs can be offset against the VAT due on your sales). VAT incurred on costs is called input VAT. It is possible to recover input VAT outside of the UK VAT return process if you do not have a place of business in the UK and are not required to be registered in the UK. If this applies to you, we recommend that you consult a tax advisor for more details on the formalities to be fulfilled.
What is the level of the VAT rates?
If you sell goods in the UK, the VAT rate applicable can vary depending on the type of goods you sell. At present, the VAT rates applicable are either 20%, 5%, or 0%. It is worth noting that the vast majority of goods sold in the UK are subject to the 20% rate - please consult your tax advisor if you are uncertain on which VAT rate(s) to apply on your products.
Businesses Established Outside EU
I sell products into an EU country from outside EU (I don’t have a business establishment in EU and I do not store goods in EU). Do I need to register for VAT?
If you import goods into the EU for onward sale, you will generally be required to pay import VAT (and possibly import duty) to the tax authority where the goods are imported. Please note you will be required to register for VAT if you store goods in an EU country. There are many ways to structure and pay import VAT, if you require more detailed advice we recommend you consult with a tax advisor with experience of UK VAT.
Although my company is located outside EU, for my business operations I store goods in UK and only sell to UK based customers. Do I need to register for VAT in UK?
If you store goods with Whiplash in the UK, sell and move these goods to UK based customers, you are required to VAT register in the UK immediately (from the moment the goods enter the UK). Please note that an overseas (non-EU) business may also be required to appoint a UK tax representative. Similarly, if you store goods in any other EU country, you will be required to VAT register in that country as well.
Although my company is located outside EU, I store goods in the UK and sell to non-UK based customers. Do I need to register for VAT in UK?
If you store goods with Whiplash in the UK, sell and move these goods to the UK based customers, you are required to VAT register immediately. This is because the UK domestic VAT registration threshold only applies to persons that have a place of business in the UK. Please note that an overseas (non-EU) business may also be required to appoint a UK tax representative.
Additionally, if you store goods in the UK, sell and move these goods to private individuals in other EU countries (often referred to as distance selling), you may also be required to register for VAT in the EU country where the goods are received.
Businesses Established in an EU Country
I sell products from an EU country into another EU country. Where do I need to register for VAT?
When selling products from one EU country into another EU country, you should be aware that the tax rate can be different from country to country. If you store your goods in an EU country, you are required to VAT register in that EU Country once your sales exceed the VAT registration threshold, if any.
Additionally, if you transfer your own goods from one EU Country to another, or if Whiplash transfers your goods from a fulfillment center into another country where your products will be stored, the transfer may also be treated as a transaction subject to VAT. You are responsible for meeting any VAT obligations that apply, including VAT obligations in the Amazon Marketplace website locations, the countries from which you are delivering your products, the countries to which you are delivering or shipping your products, or any other countries (e.g. country of importation, in case you import products from non-EU). Please also refer to the distance selling section above.
In the UK, an EORI number is assigned to importers and exporters by HMRC (Her Majesty's Revenue and Customs). Your EORI number is used in the process of customs entry declarations and customs clearance for both import and export shipments from the United Kingdom.
When do I need an EORI number?
You will need to apply for an EORI number if you import goods or export goods to the EU. If you're planning on using our London facility, an EORI number is required.
How do I get an EORI number?
Applying for an EORI is relatively simple. There's an application form to fill out and send to HMRC.
There are three forms to choose from, depending on your situation:
We recommend all non-VAT registered customers shipping to our London facility apply for the EORI number after the first shipment has been dispatched. By applying after the first shipment, you will know the carrier and tracking information required on the application.
Once you have received your EORI number, you should use it on all your future imports to our UK facilities. Additionally, save your EORI number to your Whiplash "Preferences" so it can be used on your UK shipments.
What is a VAT number?
What is Customs duty?
What is Import VAT?
What is an EORI number?