Are you running an international e-commerce business? Wondering how to manage your taxes effectively? Read on to learn more about your tax management.
The arrival of the internet has brought global e-commerce to the world. Shoppers all around the globe can easily find products on a worldwide platform. It’s no wonder, then, that so many entrepreneurs are launching their online selling businesses to tap into this lucrative international market. If you’re one of them, you’ll need to know how to manage your taxes effectively to maximise your profits and avoid falling foul of the law.
VAT And E-Commerce
Anyone running an e-commerce business may need to begin charging VAT if their operation becomes successful. Many of the rules surrounding VAT which apply to brick-and-mortar stores apply to online businesses too. If your business turnover is over £85,000 within 12 months, you have to register immediately for VAT unless your business involves e-books or music downloads.
Your prices can then be displayed as inclusive of VAT. When you’re selling goods online to the international market, VAT becomes more complex. Most goods that are sent overseas outside the European Union can be VAT zero-rated.
Sales To EU Buyers Who Are Registered For VAT
If you’re selling goods to VAT-registered purchasers within the EU, you can zero-rate your products for VAT. To do this, though, you’ll need to ensure the purchaser’s VAT registration number is on the sales invoices and you have evidence of removal. You’ll also need to send a list of all your sales within the EU to HMRC.
Selling To EU Buyers Who Aren’t Registered For VAT
If you’re supplying goods to an EU customer who isn’t VAT-registered, this is known as a “distance sale”. VAT can be charged for a distance sale at the typical UK rate. However, you’ll need to be aware of the distance selling threshold for each country with which you trade, since exceeding this limit means you’ll need to register, then pay VAT within that country.
Selling Outside The European Union
VAT is only a tax within the EU, so you don’t charge VAT on any goods which are sold overseas outside the European Union. The sale can be zero-rated if you’re able to provide evidence of that sale within 3 months of it occurring. To complicate matters, though, if you’re selling to a customer outside the EU but are sending those goods to a business within the EU to be processed, you may be able to zero-rate them. Certain conditions must be met.
You’ll also need to obtain an EORI (Economic Operator Registration & Identification Number) so the customer’s authorities of the EU will be satisfied.
Navigating Your Complex Taxation Position
If you’re selling your products to an overseas market, it’s clear to see that the taxation landscape can be complicated to navigate. Therefore, obtaining professional advice is always a wise idea. Thanks to our extensive experience and expertise in this field, we’re well-placed to assist you. Contact us today to learn more about how you can determine your cost of doing business abroad, and how to optimise your tax position, no matter where you do business.