What is VAT?
The Value Added Tax, better known as VAT, is a consumption tax placed on a product at each stage of the supply chain where value is added to the product. This process includes tax added at each step from the production of the product to the point of sale.
VAT typically applies to orders that are shipped to customers in the EU member states.
VAT vs. Sales Tax:
Unlike sales tax, VAT is added and levied at each known step of the production process. With sales tax, the entire tax amount is determined and charged after the sale of the product. Since VAT is added at each value addition of the product and not at the product's sale, it assures that the same product is not double taxed.
What are the VAT changes?
There are two main changes for online sellers regarding VAT.
- There is a new EU-wide threshold for VAT. Previously, the threshold was between EUR 35,000 to 100,000, depending on the EU member state. Now, the threshold is replaced with a new EU-wide threshold of EUR 10,000. You can register in the One-Stop-Shop (OSS), where you can declare and pay the VAT due in other member states.
- The VAT exemption for the importation of goods has been removed, and as a result, all goods imported to the EU are now subject to VAT. You can register for the Import One-Stop-Shop, which was created to help facilitate and simplify the declaration and payment of VAT.
You can read more about VAT, the changes, and what you can do using the resources provided below:
| What is VAT? | https://ec.europa.eu/taxation_customs/what-vat_en |
| What has changed, and how does it affect you? | https://ec.europa.eu/taxation_customs/online-sellers_en |
| One-Stop-Shop | https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce/oss_en |
| Import-One-Stop-Shop | https://ec.europa.eu/taxation_customs/ioss_en |
What we recommend you to do
Sensaria is currently working to understand and implement the systems necessary for VAT. Given our distributed network of manufacturers, this is a complicated process, and we will keep you informed of any updates.
We strongly recommend that your business consult a tax expert to understand the VAT change's impact and figure out what your company should do.