As the situation is constantly developing, this information is subject to change. We’ll keep this page as up to date as possible. Last updated: 21/04/2020
It’s understandable that VAT might not be your top priority right now. Especially with news outlets reporting on the COVID-19 outbreak using words like ‘deferment’ and ‘extension’ when it comes to taxes. The reality is, it’s not that simple for ecommerce businesses trading cross-border.
Whilst many tax authorities have put new measures in place to aid businesses during this period of turmoil, navigating these changes is more complicated than ever. As we work alongside tax authorities across the EU and beyond, we’ve debunked some of the VAT relief news circulating to give you clear and concise information that you can use to protect your business:
So, what does it mean if a tax authority is allowing businesses to ‘defer’ VAT payments?
Some governments have announced that in order to ease financial strain, VAT payments to the tax authorities will effectively be postponed for a defined period. For example, the UK has stated that VAT bills from March 2020 until June 30 will be deferred until the end of the tax year. This applies to all VAT registered businesses.
However, this may not be the case with much of the deferments. Guidance on whether foreign businesses are eligible for certain VAT payment extensions is not clear yet and will need to be accessed on a case by case basis.
So, if you have a VAT obligation in a country that differs to your country of establishment, it’s worth considering that the tax relief in that country may only apply to domestic businesses.
Deferments mostly refer to VAT payments and NOT submissions
In most cases where a tax authority has chosen to provide payment extensions, this will not apply to submissions.
You might still required to file your VAT returns as normal even if you are not required to pay the VAT due at this time.
It’s vital that, should you choose to defer your VAT payments, you remain on top of the paperwork. Your VAT returns show where VAT has been collected and help tax authorities to prevent VAT fraud, which is why they still need to be filed. They are also used to show and calculate what VAT will need to be paid once the extensions or deferments have ceased.
Applying for tax relief
To have VAT payments delayed or access certain VAT relief packages, you might have to put together an application. In the Netherlands, businesses have the opportunity to apply for a 3-month payment extension on all taxes, including VAT. In this instance and in other countries utilising an application process like this, there will be different criteria that need to be met for an extension to be granted.
This means that extensions are not guaranteed and subject to review.
So, don’t assume that your business will be exempt from VAT payments – even if the country you are trading in has VAT relief measures in place.
No VAT relief for some
Some tax authorities are yet to put in places any measures and are operating as usual. And some, like France, do not see the collection of VAT as a strain on businesses. This is because VAT is an indirect tax, collected from consumers, and should not affect businesses. If you’re running a French business, you can apply for deferment of payment on direct taxes only.
No two Member States are the same
As usual, different EU Member States have approached addressing the financial difficulties faced by businesses in very different ways. As have other tax authorities across the globe. In this situation, the best course of action is to seek the advice of an expert, such as ourselves.
Failure to comply can still have big ramifications for your business.
Where some tax authorities, such as in the Czech Republic and Eire, have stated that there may be waivers of late-filing fees, this is not the case in all countries. Further to this, most tax authorities will be assessing whether penalties will be applied on a case by case basis. Meaning there is no guarantee that penalties and the subsequent interest applied to fines will be remitted.
Enough with the doom and gloom
Whilst this may not have felt like the cheeriest of reads, it’s our job to ensure you’ve got the information needed to make the right decisions for your business. There are measures in place to support you. And with the right guidance, you can mitigate the effects of this crisis on your bottom line.
As an ecommerce business, when should I be charging VAT?
If you’re unsure about whether you should be charging VAT, ask yourself the following questions:
- Have you been moving and holding stock in another European Union (EU) member state?
- Are you selling goods on a marketplace in the EU?
- Have you been importing goods from outside the EU?
- Are you selling B2C digital services such as a software or music streaming?
- Have you had a peak of sales since last Christmas? Maybe you breached a distance selling threshold in another EU member state?
If the answer is yes to any of the above, you might have triggered an EU VAT obligation. This would result in the need to VAT register in the respective country, charging your customers VAT, meeting the necessary VAT return filing frequency and possibly submitting other documentation such as an EC Sales list.
To understand your obligations further or to start your journey to VAT compliance, contact us. We are always ready to help entrepreneurs with their individual VAT scenarios; answering any of your questions and ensuring your business remains compliant. Even in these troubling times. Schedule a call to speak with our expert team today.