Sale season has arrived! As November rolls around, Black Friday and Cyber Monday mark the highly anticipated dates in the diary that, for most businesses, generate record-breaking sales. Q4 presents a great opportunity to expand into new markets and entice a new customer pool with great deals. But are you ready to fulfil orders compliantly during the peak shopping season?
With more cross-border sales, comes more cross-border VAT, which makes having a strategy to handle your business’s compliance even more essential. VAT regulations have gone through major changes in 2021, but have also come with new options to manage compliance in the EU.
How will businesses making distance sales be affected?
Previously, Distance Selling Thresholds meant that ecommerce sellers supplying goods to customers in multiple EU Member States would need to carefully monitor sales in each destination. Surpassing this threshold would then have triggered a VAT registration in that location.
Now, however, as these thresholds have been abolished, businesses selling cross-border to any customer in the EU will need to apply VAT according to where this customer is based. For businesses participating in Black Friday and Cyber Monday sales who intend to sell throughout the EU, the OSS scheme can simplify the entire process. OSS enables you to VAT register in one country of your choosing and report all cross-border VAT on a single, quarterly return. This way, you can save more valuable time needed to stay on top of stock and sell smoothly across the November sales.
Should I change my pricing during Black Friday?
As a defining element of the success of Black Friday and Cyber Monday, sale offers and price reductions are a great way to gain traction with eager shoppers. However, with the abolishment of Low-Value Consignment Relief, changing your pricing could have a major impact on your VAT obligations.
In the July 2021 EU VAT reforms, new legislation stated that businesses importing consignments into the EU below EUR 150 are eligible for the IOSS scheme. This would enable them to register in a single EU member state and report all import VAT via a monthly return.
If your business usually sends consignments above EUR 150, but you intend on decreasing prices and they fall beneath this threshold, you may benefit from the IOSS scheme. This can make it easier to handle the increased sales, and therefore VAT obligations, in November.
Alternatively, you may find that after these two massive shopping events, you need to raise your prices to manage your flow of stock and balance profits. If this increases your consignment value above EUR 150, you will no longer be eligible for IOSS and will need to follow standard customs procedures when sending goods to the EU.
Appointing an Importer of Record
Firstly, you will need to consider who you will appoint as the Importer of Record. This typically covers import VAT and any duties that you may incur at customs. The business usually assumes this role to unburden the customer from handling unexpected fees and/or complex customs processes.
If you, as the importing business, decide to be the Importer of Record, you will need to remit import VAT to the tax authorities in the EU Member State where the final customer resides. You will also need to register for VAT in that member state to recoup the import VAT paid on your periodic VAT return. You would then need to account for the transfer of goods on your local VAT return (providing the customer is in the same EU member state as your goods) or via the Union OSS (if the customer is in a different EU member state as your goods).
Deciding on a courier
Secondly, choosing a courier and understanding how their delivery route affects your VAT obligation is important. If your consignments exceeding EUR 150 do not originate in the EU at point of sale, you may choose a third-party courier to deliver your supplies on behalf of your business. In this case you will need to pay any VAT due where your goods are imported. This is important because often couriers may choose to import the goods via a different country to the destination of the consignment. Therefore you may have an obligation to register and pay for VAT in more than one location.
How do I apply VAT rates?
In the flurry of sales that may come during Black Friday and Cyber Monday, applying the correct VAT rates to each sale made to an EU Member State is vital. Across the EU these rates vary significantly and charging customers incorrect VAT rates can cause major issues with your returns and complicate your processes.
If you sell through your own website this is very important as you will need to apply VAT rates to each order during checkout. This can be challenging during the November sales season – for sellers using Shopify, we offer an API that can automatically pull your sales data to make handling VAT easier and prevent you from becoming overwhelmed during busy periods.
How to I report VAT when using a 3PL?
Are you considering using a 3PL or expanding to a marketplace this Black Friday/Cyber Monday to increase your sales and efficiency? Exploring new ways to fulfil orders or places to offer them is an excellent idea and setting up prior to the November sales can give your business the kick-start it needs to succeed.
3PL’s like Amazon Pan-European FBA can be the perfect way to set about entering the EU market and finding new customers. However, holding stock in any EU member state will always require a VAT registration at that location, therefore storing goods within Amazon’s warehouses will trigger this obligation. To cut down on the administrative constraints filing returns in each EU member state where you hold stock, the OSS scheme allows you to report all intra-EU sales via a single VAT return. This can significantly reduce the amount of time and energy spent on filing returns, so that you can focus on other tasks at hand.
During busy sales periods like Black Friday and Cyber Monday, your business can benefit from using a 3PL to ensure efficiency across your supply chain. Making sure your VAT compliance is efficient is important during these periods, to ensure you have no weak link in your ecommerce armour when the hordes of shoppers come your way!
Get in touch with our team at SimplyVAT.com if you have any questions about your cross-border VAT compliance or how we can help you streamline your obligations in preparation for November.