VAT Compliance for Digital Businesses
E-commerce businesses face unique VAT challenges, especially when selling through online marketplaces. This guide explains the key rules and obligations for online sellers under UK and EU VAT regulations.
1. UK VAT Registration Thresholds
You must register for VAT if:
- Your taxable turnover exceeds £85,000 in any 12-month period
- You expect to exceed £85,000 in the next 30 days
- You're based outside the UK but sell goods to UK customers
Voluntary registration may be beneficial even below the threshold to reclaim input VAT.
2. Marketplace Facilitator Rules
For sales through platforms like Amazon, eBay or Etsy:
- The marketplace is responsible for collecting/output VAT on sales
- You must still register if your total sales exceed thresholds
- Different rules apply for FBA (Fulfillment by Amazon) inventory
3. Distance Selling Thresholds (EU)
When selling to EU customers:
| Country | Distance Selling Threshold |
|---|---|
| Germany | €100,000 |
| France | €35,000 |
| Italy | €35,000 |
| Spain | €35,000 |
Above these limits, you must register for VAT in that country.
4. Import VAT and Customs
Key considerations:
- Goods imported into UK/EU are subject to import VAT
- Postponed VAT accounting available for UK imports
- Low value consignment relief abolished for UK/EU
5. Digital Services VAT (MOSS)
For digital products/services:
- VAT charged based on customer location
- Use VAT MOSS scheme for EU reporting
- Must validate customer location evidence