VAT Register To Give Your Customers A Better Buying Experience
The world is divided into two territories when it comes to VAT – those inside the European Union and those based outside.
EU Based Companies
If you are within the European Union and you sell your goods online to consumers in other countries within the EU – you are ‘distance selling’.
The VAT Rates in the European countries differ from between 15 and 27%. The distance selling VAT laws were introduced within the EU to avoid unfair competitive advantage in those countries with the lower rates.
If your sales exceed the ‘distance selling’ thresholds in any other EU country, you will have to register there for VAT. Once registered, you will have to start charging VAT at that’s country’s VAT rate, collect the VAT from your buyer and submit those taxes to the tax authority of that country.
For companies based outside the EU, there are a number of import taxes such as VAT and duty to consider – how much is due is calculated on the value of the goods. The EU valuations rules need to be understood. However the fundamental issue is ‘who is the Importer of Record’ and therefore responsible for the payment of all import taxes – you, the supplier, or your customer?
A lot of suppliers leave the customer to be the Importer of Record. The downfalls to this are:
1. On delivery, the customer has to pay the import charges – sometimes unexpectantly.
2. Large numbers of goods are returned from disgruntled customers.
If you, the supplier become the Importer of Record, you will have to VAT register in the country of importation, however the benefits normally outweigh the costs.
1. You can advertise that your products will be delivered without further charges being applied – the price paid online includes the VAT owed and is the total price.
2. The number of returns are reduced.
3. The import charges are based on the lower production and transport costs
4. You can claim the import VAT you pay back on your VAT return.
Becoming the Importer of Record and thus registering for VAT can help create competitive advantage by reducing import taxes and more importantly, by providing a better customer buying experience.