VAT, or Value Added Tax, is a crucial aspect of international commerce that impacts purchases and sales. This article aims to provide further information on VAT and how it affects sellers.
What is VAT (Valued Added Tax)?
How VAT Affects Sellers
Important to Know
What is VAT (Valued Added Tax)?
VAT is essentially a consumption tax applied to the value added to goods and services at each stage of production and distribution. As a fulfillment customer, it's important to comprehend how VAT influences your transactions, particularly when dealing with cross-border sales.
When you buy products from an international seller or utilize fulfillment services across borders, VAT may apply depending on various factors such as the seller's location, the type of goods or services, and the destination country's tax regulations.
For instance, if you're based in a country that imposes VAT and you import goods from another country, you might be subject to pay VAT on those imported goods. This VAT payment typically includes the product's value, shipping costs, and any applicable duties.
How VAT Affects Sellers
As a fulfillment customer, being aware of VAT implications is crucial for budgeting and compliance. Remember, VAT regulations can be intricate and vary significantly between countries, so seeking advice from tax professionals can help navigate these complexities and ensure compliance with tax laws.
Important to Know
As of July 1, 2021, the EU began enforcing the VAT eCommerce package, which includes new rules regarding eCommerce and VAT. These rules have an immediate effect on all businesses in the supply chain such as individual sellers and marketplaces. All distance sellers within the EU or trading with the EU should have redefined their VAT requirements as of July 2021.
For more information about this change, please reference the European Commission Website: European Commission - Tax and Customs Union
An Overview of the Changes in Effect as of 7/1/2021
- Removing the distance selling thresholds for sales of goods and setting a unified threshold of 10.000 Euros
- Expanding the Mini One Stop Shop (MOSS) by launching the new One Stop Shop (OSS)
- Ending the low-value import VAT exemption and introducing the new IOSS
- Online marketplaces will be deemed the seller for collecting and reporting VAT
- New record-keeping requirements will be introduced for online marketplaces facilitating supplies of goods and services
- Special arrangements in order to simplify imported goods with a value of less than €150 in case the IOSS (import one-stop-shop) is not used
What This Means for Me as the Merchant
It's your responsibility to provide all VAT information to support@lvk.com or your onboarding specialist when setting up your Fulfillment account. Please reach out to us if you need to add this or make any changes to your VAT settings. We're here to help!