VAT (Value Added Tax) is a consumption tax that applies to cross-border purchases and sales. As a fulfillment customer, understanding how VAT affects your transactions helps you budget correctly and stay compliant.
Table of Contents
- Understanding VAT (Value Added Tax)
- How VAT Affects Sellers
- EU VAT eCommerce Package Changes
- Additional Resources
Understanding VAT (Value Added Tax)
VAT is a consumption tax that governments apply to the value added to goods and services at each stage of production and distribution. You should understand how VAT affects your transactions, especially for cross-border sales.
When you buy products from an international seller, or use fulfillment services across borders, VAT may apply depending on factors like the seller's location, the type of goods or services, and the destination country's tax rules.
For example, if you're based in a country that charges VAT and you import goods from another country, you may need to pay VAT on those goods. This VAT payment typically covers the product's value, shipping costs, and any applicable duties.
How VAT Affects Sellers
As a fulfillment customer, understanding VAT helps with budgeting and compliance. VAT rules vary by country and can get complicated, so consider talking to a tax professional to make sure you stay compliant.
EU VAT eCommerce Package Changes
As of July 1, 2021, the EU began enforcing the VAT eCommerce package, a set of new rules for eCommerce and VAT. These rules immediately affected all businesses in the supply chain, including individual sellers and marketplaces. All distance sellers within the EU, or those trading with the EU, needed to redefine their VAT requirements by July 2021.
Key EU VAT eCommerce Package Changes
- Removed the distance selling threshold for goods and set a unified threshold of €10,000.
- Expanded the Mini One Stop Shop (MOSS) into the new One Stop Shop (OSS).
- Ended the low-value import VAT exemption and introduced the new Import One Stop Shop (IOSS).
- Made online marketplaces responsible for collecting and reporting VAT as the deemed seller.
- Introduced new record-keeping requirements for online marketplaces that facilitate the supply of goods and services.
- Introduced special arrangements to simplify imports valued under €150 when the IOSS isn't used.
What VAT Changes Mean for You as the Merchant
You're responsible for providing your VAT information to support@lvk.com or your onboarding specialist when you set up your Fulfillment account. Contact us if you need to add or update your VAT settings.