WooCommerce VAT: A Guide to Selling Cross-Border Compliantly in 2024

May 3, 2023 in Ecommerce, Ecommerce Tips, European VAT, VAT

If you’re thinking of starting a WooCommerce store or already have one, we’ve got the ultimate guide to make sure you’re compliant when selling online in 2024. We’ve just launched our new WooCommerce integration – making life easier for WooCommerce sellers.

With over 6.5 million websites choosing to use WooCommerce to power their ecommerce businesses, it is arguably the number one ecommerce platform. From its launch in 2008, it has grown into the industry-leading ecommerce platform by market share with a whopping 36%. From granular customisation to hundreds of extensions, this feature-rich platform is an obvious choice for many sellers. We’re here to help guide you through some of the complexities you may face when selling internationally using WooCommerce.

Often, the more complex yet essential aspects of international ecommerce are overlooked in the excitement of selling online. Understanding VAT and its impact on your business is critical for both EU and non-EU sellers who use WooCommerce to reach EU customers.

What do we mean by selling cross-border?

When selling online, your sales might be categorised as either domestic or cross-border. When we talk about domestic sales, we are referring to  sales made within the same country, e.g. a UK business selling online to UK customers with goods based in the UK. When we refer to cross-border sales or international sales, we are referring to sales made to or from a country where you are not established or your goods are not based, e.g. a UK business selling goods to a customer based in France.  

Domestic and cross-border sales each come with their own set of rules. In this guide, we’ll be taking you through everything you need to know about cross-border sales and the VAT implications of doing so.

What do I need to know about VAT when selling cross-border with WooCommerce?

In this section, we’ll go over the VAT implications of selling on your own website through WooCommerce, as well as the next steps you can take to stay compliant.

Introduction to VAT in the EU

We’ll get on to the scenarios in which you may need to register for the different reporting schemes in a little bit, but first a bit of background on the different schemes.

When selling into the EU there are a few different options when it comes to reporting your VAT. Firstly, there’s a “local registration” this is what you typically think of when having to register for VAT. I.e. You will register with the local tax authorities of a particular EU member state and file returns for sales/stock within that individual country.

As of 2021, there are two additional ways you can report VAT across the EU. These are the One Stop Shop (OSS) and Import One Stop Shop (IOSS) schemes. These schemes were introduced as a simplification for sellers who sold to multiple EU countries. As such, instead of creating multiple local registrations as mentioned above, instead, you can register in one EU country and report and remit VAT across all 27 EU Member States through one return.

Do I need to VAT register in an EU country?

If you are holding stock in a country in which you are not established then you will need to register locally within that country (e.g. a US or French company holding stock in a Spanish warehouse will need to register in Spain). You can then use this to remit any import VAT you have paid.

If you are a non-EU-based business, you will have to register from your first EU sale where your customer is based. Alternatively, you may be eligible to register for OSS or IOSS schemes which will reduce your administrative burden.

What is OSS and when can I use it?

OSS, the first of the two simplification schemes, is divided into two types – Union OSS and Non-Union OSS. Union OSS can be used by businesses based inside or outside of the EU selling B2C goods, as well as by EU-based businesses which sell B2C digital goods or services. While Non-Union OSS is reserved specifically for the sale of digital goods or services to the EU by Non-EU based businesses.

Union OSSNon-Union OSS
B2C supplies of services by EU-based businesses
Distance sales of goods within the EU by both EU and non-EU sellers
Domestic sales of goods by online marketplaces when they facilitate the sale on behalf of a non-EU businesses
Non-EU sellers supplying services to EU-based consumers.

What is IOSS and what are its benefits?

The second simplification scheme, IOSS, is aimed at helping sellers who import their goods at the point of sale. Through IOSS you can report the B2C sales of any consigments with a value of below €150 which are based outside of the EU when they are sold. By using IOSS you can reclaim your import VAT as well as expedite the customs process, making for a better customer experience. Sales of goods above €150 will need to be reported as usual through local registrations in the countries to which you sell. 

Charging VAT where your customers are based

Since 2021, sellers are now required to charge the local VAT rate based on the location of their customers. This will directly impact you if you sell through your own WooCommerce website, as you will be required to charge the correct rate of VAT for every sale made to EU customers.
VAT rates vary across the EU, ranging from 17-27%, so staying up to date and aware of the VAT rates is critical to protecting your margins. Want to learn more about VAT in the EU? Visit our EU VAT Numbers 101 to learn everything you need to know about EU VAT.

How to setup VAT settings in WooCommerce

To start charging and collecting VAT on your WooCommerce sales, you need to update the settings. 

Go to: WooCommerce > Settings > General.

Select the Enable Taxes and Tax Calculations checkbox.

Save changes.

After this, you will need to configure your VAT settings for each of the EU countries you sell to.

How to configure EU VAT rates

When selling to EU customers, it’s important to make sure you’re charging the VAT rate specific to where your customer is based as rates vary from country to country. WooCommerce has created a handy walkthrough guide on how you can configure your EU VAT rates.

You will need an up-to-date list of the EU VAT rates to input, which we’ve put together into a downloadable PDF. If you need some further support with an EU VAT rate review, our consultancy team are experts at ensuring you’re applying the correct rates on your EU sales.

How our WooCommerce integration can help you

With our new integration for WooCommerce sellers, you can streamline the transfer of your sales data to our proprietary software. From there, we can calculate how much VAT you owe and to which tax authorities.

Next steps

We hope that this guide has helped you gain some insight into the VAT obligations you may create when selling cross-border with WooCommerce. To ensure that you don’t fall foul of VAT regulations, we highly recommend you consult with a dedicated EU VAT compliance company. If you have questions about the compliance of your WooCommerce store, get in touch with a member of our team.

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