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Selling to the EU from Outside? What Non-EU Businesses Need to Know About VAT

What is EU VAT and how does it apply to foreign sellers?

Non-EU companies have many opportunities when selling in the EU. Managing the intricate and fragmented VAT system is necessary to maintain compliance and avoid unforeseen financial and administrative implications. This article takes an in-depth look at the main VAT considerations that non-EU companies must take into account when selling goods or services to EU customers.

1. The Challenge of Managing 27 Distinct VAT Regimes

Although the EU is a single market, the VAT legislation of the 27 member states is not completely standardised. VAT rates, registration rules, administrative and compliance requirements vary from state to state. As a result, sellers outside the EU may be required to register for VAT in many jurisdictions, depending on the worldwide geography of their customers. 

Simplification schemes such as Import One Stop Shop (IOSS) and One Stop Shop (OSS) have been introduced to simplify the administrative task by grouping VAT returns on a specific category of transactions. The application and scope of the mechanisms are limited and new businesses need to check which schemes apply to their transactions.  that all import regulations are complied with, thereby avoiding potential fines and delays.

2. Do Non-EU Sellers Need to Register for VAT in the EU ?

Non-EU businesses making distance sales in the European Union often need to register for VAT in one or more member states. It is easier to meet this requirement with the OSS, as it facilitates a single VAT return for cross-border business-to-consumer (B2C) sales of digital services and products throughout the EU. However, it does not consider all sales, such as intra-EU purchases and B2B sales. 

Most importantly, the previous €22 exemption on low-value imports has been eliminated as of July 2021. As a result, all commercial imports into the EU are now subject to VAT, regardless of value. This regulatory change has substantial implications for companies dealing with low-value, high-volume exports, and therefore careful accounting for VAT on imports is important. Submitting VAT-compliant invoices, keeping proper records, checking the VAT number of the business customer (through the VIES system), and timely submission of VAT returns-which, under national law, may be required on a quarterly or monthly basis-are elements of compliance.

3. Online Marketplaces as VAT Withholding Agents: Implications for Non-EU Sellers

Online platforms have been recognized as “deemed suppliers” or withholding agents for VAT purposes in specific cross-border e-commerce transactions within the European Union. Since July 2021, under the EU’s e-commerce VAT package, third-party sellers charge and pay VAT on sales through their services. Such development has important compliance implications for non-EU companies that supply products to EU consumers through online marketplaces. Although the burden of collecting and paying VAT rests primarily with the marketplace operator, the non-EU sellers must understand their position in the supply chain, ensure that their documents are correct, and cooperate with the platform.  

While this mechanism aims to improve VAT compliance and reduce the risk of fraud, it also requires non-EU businesses to align their operations and accounting practices with the platform’s VAT processes. Inadequate management of coordination can lead to unexpected expenses or disruption of market access. The complexity of VAT obligations across sales models is highlighted by the fact that non-EU sellers using their own websites or other means must still be directly responsible for VAT registration, collection, and declaration in their respective member states. 

4. The Import One Stop Shop (IOSS): Streamlining VAT for Non-EU Sellers

Introduced on July 1, 2021, in conjunction with the abolition of low-value shipping relief, Import One Stop Shop (IOSS) simplifies VAT payment for distance sales of imported goods up to a limit of €150. IOSS allows non-EU sellers to register once in an EU member state to simplify the declaration and payment of VAT throughout the EU without having to register in multiple countries. 

IOSS allows for easier and faster customs clearance and greater customer satisfaction by charging VAT at the time of purchase, rather than as import duty. Non-EU sellers, however, will require an intermediary within the EU to be responsible for their VAT compliance, adding an additional layer of control over administration. 

Although it is a useful aid in handling low-value shipments, the IOSS does not cover goods with a value greater than 150 euros or certain excise goods, which remain under the regular import VAT regime. In general, IOSS is a useful aid for non-EU companies wishing to easily penetrate the EU market, provided they incorporate the appropriate compliance mechanisms.

5. What Are the Ongoing VAT Compliance Rules in the EU ?

Aside from registration and payment, EU VAT compliance requires strict management. Companies must have auditable records of transactions, adapt invoicing to suit national needs, adhere to data retention regulations, and meet reporting deadlines. The variety of regulations among member states increases the complexity and resource level imposed on non-EU companies. 

In addition, due to such continuous projects as the EU Electronic Invoicing Directive and heightened digital reporting attention, companies are required to stay in touch with technical and procedural developments. The European Commission’s VAT Action Plan also brings further harmonization and modernization to simplify VAT administration, as well as combat fraud.

6. How Gerlach Customs Supports Non-EU Businesses Selling to the EU ?

Dealing with EU VAT rules from outside the EU requires expert support. Gerlach Customs assists non-EU businesses by: 

  • Analyzing VAT obligations: Interpreting where and when VAT registration is necessary in the different Member States 
  • Assisting OSS and IOSS registration and compliance: : Helping clients take advantage of streamlined VAT report schemes. 
  • Assisting invoicing and record-keeping: Modifying procedures to satisfy the various VAT invoicing rules and digital reporting requirements. 
  • Overseeing compliance for sales via marketplaces: Informing non-EU sellers of their responsibilities where marketplaces act as VAT withholding agents. 
  • Keeping clients updated: Providing prompt notification of evolving EU VAT rules and digital developments. 
  • Fiscal risk mitigation and operational complexity: Businesses can avoid penalties and ensure continued market access by actively managing VAT. 

With Gerlach Customs, non-EU businesses can confidently expand into the EU market while staying fully compliant with its complex VAT framework. 

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