Does your business sell goods to consumers in other EU countries?
If a business sells goods to consumers (customers that are not registered for VAT) in another EU country and the delivery of the goods is carried out by, or under the direction of, the supplier, the business could be liable to register for VAT where the consumers are located.
The rules are known as distance selling rules. Special rules apply to sales of excise goods and new means of transport and are not covered by this article.
The effect of the distance selling rules are that a supplier must account for VAT in the EU country where the consumers are located unless the total value of distance sales to that country in a calendar year falls below the distance selling limit set by the country. Each EU country chooses a distance selling limit of either EUR 35,000 or EUR 100,000 (or a limit based on the relevant currency equivalent of one of those amounts).
The rules are intended to combat distortion of trade and unfair competition. Without the distance selling rules, cross-border supplies to private individuals would be subject to VAT in the EU country of dispatch as a domestic supply. The variations in VAT rates between EU countries could encourage businesses selling mainly to private individuals to relocate to a country with a relatively low rate of VAT.
Apparently some businesses have attempted to avoid the effect of the distance selling rules by arguing that they were not involved in the delivery of the goods. The UK and Belgium consulted the EU VAT Committee who issued a guideline that goods shall be considered to have been dispatched or transported by or on behalf of the supplier in any cases where the supplier intervenes directly or indirectly in the transport or dispatch of the goods. The following points are relevant.
The supplier shall be regarded as having intervened indirectly in the dispatch or transport of the goods in any of the following cases:
- where the transport or dispatch of the goods is subcontracted by the supplier to a third party who delivers the goods to the customer;
- where the dispatch or transport of the goods is provided by a third party but the supplier bears totally or partially the responsibility for the delivery of the goods to the customer;
- where the supplier invoices and collects the transport fees from the customer and further remits them to a third party that will arrange the dispatch or transport of the goods;
- the supplier actively promotes the delivery services of a third party to the customer, puts the customer and the third party in contact and provides to the third party the information needed for the delivery of the goods.
The guideline went on to confirm that goods shall not be considered to have been dispatched or transported by or on behalf of the supplier where:
- the customer transports the goods himself;
- the customer arranges the delivery of the goods with a third person and the supplier does not intervene directly or indirectly in providing or helping organising the dispatch or transport of those goods. Note that VAT Committee guidelines represent the views of the Committee and are not legally binding but can be persuasive in court. The UK has adopted the Guideline as set out above.
Please contact the Garbutt + Elliott VAT team it you would like advice regarding the impact of the distance selling rules on your business.