Businesses in the US and Asia importing or selling products to the European Union must get their act together when it comes to Value Added Tax (VAT). Yet, understanding how to register and pay VAT, as a non-European company, is complicated.
As such, we decided to ask one of the Europes leading VAT experts, Dr. Matthias Oldiges – Managing Associate at KMLZ (Küffner, Maunz, Langer and Zugmaier) in Munich.
These topics are covered:
1. VAT when selling cross-border (B2C) to customers in the European Union as a non-EU company
2. VAT when importing into the European Union (i.e., Amazon FBA) as a non-EU company
3. VAT threshold in different EU states
4. How to get VAT registered as a non-EU company
5. How to pay VAT as a non-EU company
Matthias, how did you end up working for KMLZ?
You can know something about everything or know a lot about something. KMLZ decided on the latter and concentrated on VAT law, customs law and criminal law. I wrote my doctoral thesis on a VAT legal topic.
This ultimately led me to KMLZ, where I have now been working as a lawyer (Managing Associate) for almost six years. We advise our clients on VAT and customs law related matters within Europe, as well as worldwide.
Our strong network of experienced and leading VAT experts, in all Member States of the European Union and beyond, enables us to provide our clients with international advice at the highest levels.
Let’s say that a US or Asian company want to sell cross-border (B2C) into the EU, do they need to get VAT registered?
This depends on the individual case. The answer to the question of who is liable for import VAT is decisive. The person who lodges a customs declaration is liable for import VAT. Therefore, it is very important that the seller and the customer agree on this question in the purchase agreement (e.g. [Website] Terms & Conditions).
The purchase agreement should cover the question which party (seller or customer) is responsible to lodge the customs declaration in the EU Member State of importation. In this context, please see the following scenarios:
If the US or Asian company (or their respective agent) lodges the customs declaration in the EU, the US or Asian company (or their respective agent) is liable for import VAT in the relevant EU Member State.
The sale to the customer is deemed to be within the scope of VAT in the customer’s EU Member State.
In this case, the US or Asian company is required to register for VAT purposes in the customer’s EU Member State and to declare the sale in the VAT return of the Member State of importation.
However, the US or Asian company can avoid the need for VAT registration in the EU Member State of importation. This is the case if the parties agree that the customer is responsible to lodge the customs declaration in the EU Member State of importation.
In this case, the customer is liable for import VAT in the said EU Member State. Consequently, there is no seller’s obligation to register in the EU Member State for VAT purposes.
Now, let’s assume that I want to import goods into an EU country, and sell on Amazon.com. I guess this requires VAT registration?
Yes. Normally, you can import goods into an EU Member State and store them in an Amazon fulfillment center.
In order to be able to be placed in a customs procedure, the non-Union goods must be presented to customs. The presented goods are then declared for a customs procedure. A customs declaration must be submitted in order for this to take place.
This is regularly submitted electronically using the ATLAS system for electronic customs clearance, and will be until such time as a uniform IT system for the whole of the European Union is in place. Declaration formalities must be carried out by a company registered in the EU.
Submission of the customs declaration by a representative, such as a forwarding agent, is permitted. Companies from non-EU countries are allowed to submit a customs declaration only in very limited cases.
The importation is subject to import VAT in Europe. However, you can deduct the import VAT in your VAT return. Therefore, in general, the importation is neutral from a cash perspective.
The subsequent sale to the customer is within the scope of VAT in the EU and, therefore, requires a VAT registration in the EU. The subsequent sale to the customer is taxable with local VAT if it constitutes a local supply of goods in the customer’s Member State.
You have to invoice the customer with local VAT. Moreover, you must declare the sale in your VAT return and must pay the relevant VAT amount to the local tax authority.
Say that I import and store products in, for example, the Netherlands – but sell online EU wide from there. Is it enough to get VAT registered in the Netherlands only?
This depends on the individual case. If you only sell B2B, you do not need to register in any EU Member States other than [in this specific example] the Netherlands.
However, in the case of B2C, you need to register in the EU Member State of the customer if your sales exceed a specific [yearly] threshold.
Thresholds, between EUR 35.000–100.000, exist for every EU Member State.
If your sales to a particular EU Member State exceed the relevant threshold, you will need to register for VAT purposes in that EU Member State. Otherwise, if your sales do not exceed the threshold, it is sufficient to be registered in the Netherlands only.
Is it possible, as a non-EU company, to get VAT registered EU wide?
Unfortunately, this is not possible. You are required to apply for VAT registration in every single EU Member State. However, the application procedure is quite similar.
Once I know where to register, how do I actually get VAT registered as a non-EU company?
VAT registration is a very formalistic procedure. It usually includes the identification of the competent tax authority, preparation of the required documentation and responding to follow-up questions by the tax authority.
The company registering is required to complete a standard form provided by the tax office and, usually, an additional questionnaire.
The questions contained in the latter relate to the company’s business activities and its VAT treatment. In general, the tax authority provides all necessary information for foreign companies on their website.
Okay, so how long does it take to get VAT registered from overseas?
It very much depends on the individual tax office. The registration procedure can take up to 10 weeks. You can generally say that the registration procedure is probably faster when the application is managed by a contact person in the EU.
How do I pay VAT to so many different countries at a time?
Well, if the foreign company provides all necessary documentation and clarifies all follow-up questions, the tax authority will grant a tax number.
The registered company is obliged to file its VAT returns under its tax number. In general, the company has to file electronic VAT returns on a monthly basis. If the VAT return results in a liability to make a payment, this payment has to be made to the responsible tax office in every EU Member State.
There is no EU-wide VAT transfer between the EU Member States. However, German tax offices allow direct debit.
Do I need a bank account in the EU to pay VAT?
No, a non-EU bank account is sufficient.
Thank you. How can KMLZ help non-EU companies to solve this VAT riddle?
We offer coordination of VAT registration at the relevant tax office, as well as the filing of all relevant VAT returns in Germany and all other EU Member States, from a single source.
Due to our existing contacts and good relations with the tax authorities, we can guarantee the fastest possible registration and compliance with VAT declaration obligations in Germany and all other EU Member States.
Especially in Germany, operators of electronic marketplaces, such as Amazon and eBay, are increasingly becoming the focus of the tax authorities. Operators of electronic marketplaces must provide the tax authorities with proof of their Chinese traders’ VAT registration.
Otherwise, the Chinese traders will be excluded from trading on the electronic marketplaces in Germany as from 1 January 2019, at the latest.
Therefore, all relevant traders, who are not yet registered for VAT, must apply for their registration as soon as possible.
A Chinese company doing business in Germany must obtain registration in Berlin-Neukölln. Due to our existing contacts and good relations with the tax office in Berlin-Neukölln, we can guarantee a fast registration process and compliance with VAT declaration obligations.
We are very happy to and in a unique position to assist in this regard! Please find this link for more information about our services.