Expanding your ecommerce business internationally opens exciting growth opportunities, but it also introduces complex tax obligations. One of the most critical areas to get right is VAT compliance. Unfortunately, many businesses unknowingly make costly mistakes that can lead to penalties, audits, and reputational damage.
This article explores the most common VAT pitfalls ecommerce sellers face and offers practical guidance on how to avoid them.
Many sellers wait until they’ve already exceeded a country’s VAT threshold before registering. For sellers based in the EU, for example, the threshold for cross-border sales is just €10,000. Late registration can result in backdated VAT payments, interest charges, and fines.
Each country has its own VAT rules, filing deadlines, and documentation requirements. Assuming that one-size-fits-all can lead to non-compliance. For example, VAT treatment for digital services differs significantly between the EU, UK, and Canada.
Applying the wrong VAT rate, either due to outdated information or misclassification of goods, can result in underpayment or overcharging customers. This is especially risky for products like food, books, or children’s clothing, which may be subject to reduced or zero rates.
If you sell through platforms like Amazon or eBay, you may assume they handle all VAT obligations. While marketplaces may collect VAT on certain transactions, you’re still responsible for registration, reporting, and compliance in many cases.
Importing goods into the EU or UK requires VAT to be paid at the border unless you’re registered for schemes like IOSS or Postponed VAT Accounting. Failing to account for import VAT can lead to delays and unexpected costs.
Accurate and organised records are essential for VAT reporting and audits. Missing invoices, inconsistent data, or a lack of transaction logs can make it difficult to file correctly and defend your position during an audit.
Schemes like the One Stop Shop (OSS) and Import One Stop Shop (IOSS) simplify VAT reporting across the EU. Many businesses miss out on these schemes due to a lack of awareness, resulting in unnecessary administrative burdens.
Sales thresholds for VAT registration vary by country and can change over time. Without automated tracking, businesses risk crossing thresholds without realising it, leading to late registration and penalties.
VAT compliance isn’t just about filing returns; it requires robust internal systems for invoicing, tax calculation, and reporting. Many businesses rely on manual processes that are prone to error and difficult to scale.
While VAT compliance can be complex, it’s manageable with the right approach:
At SimplyVAT, our mission is to help ecommerce businesses navigate international VAT with confidence.
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Whether you're just starting to sell internationally or scaling into new markets, we’re here to help you stay compliant and avoid costly mistakes.
Get in touch with our team for expert support tailored to your ecommerce business.
