Optimizing Your VAT When Selling B2C in the EU

This article explains the most important indirect tax planning aspects of business-to-consumer selling in the EU. The Netherlands has several planning opportunities for B2C sellers who are either importing the goods from non-EU countries into the EU or delivering the goods to other EU countries from a warehouse in the Netherlands.

Import Into the EU

Customs duty is levied across the EU at the place where goods are cleared into “free circulation” in the EU. Once duty (if applicable) and value-added tax have been paid by the importer, the goods are in free circulation and can then be released for use in the EU market. Unlike VAT, once customs duty has been paid, it is not recoverable by the importer. An exemption from customs duty applies for imports of low-value goods—consignments not exceeding 150 euros ($150.10). Import VAT will be due even if customs duties are not payable.

Most goods imported into the Netherlands from outside the EU are subject to VAT. The VAT will have to be paid by the importer at the time the goods are cleared to enter the EU. Where the importation is for business purposes, the importer may be able to reclaim the VAT, subject to certain rules. However, it is possible to postpone payment of VAT to when the periodic VAT return is due, hence no adverse cash flow occurs. This postponement is referred to as an “import VAT deferment” or “reverse charge VAT on import.” The Import One-Stop Shop could be used to simplify imports of low-value goods into the EU, which will be explained further later in this article.

The import VAT deferral means obtaining a cash flow advantage when importing goods by reporting payable and deductible import VAT on the VAT return—rather than paying import VAT on the border when goods are cleared into free circulation in the EU and deducting this VAT on the Dutch VAT return later.

How Can a Non-Dutch Business Defer Import VAT?

Appointing a fiscal representative is required if a non-Dutch business wants to apply the reverse charge VAT on import (i.e., to obtain an import VAT deferral license). In addition, if a non-EU business effects EU distance sales in the Netherlands, then appointing a general fiscal representative is required.

When a general fiscal representative is appointed, it can report all purchases and supplies of a nonresident, but the nonresident should itself be registered for VAT in the Netherlands. The advantage of appointing a general, as opposed to a limited, fiscal representative is that the general fiscal representative can report not only an importation of goods and a subsequent B2B supply but also any intra-community acquisitions and domestic purchases, as well as EU distance sales.

A fiscal representative with a general license acts on behalf of a nonresident taxable person with respect to all its supplies of goods and services for which Dutch VAT is due on intra-community acquisitions and importation of products, unless a fiscal representative with a limited license is appointed for those transactions. A nonresident taxable person may use the services of only one general fiscal representative.

Dutch Local Sales

When a non-Dutch business sells goods to private individuals located in the Netherlands from stock located in the Netherlands, the supplier becomes liable to register for VAT in the Netherlands, the Netherlands becomes the place of supply, and Dutch VAT should be charged and reported on the sales.

EU Distance Sales

Special requirements apply to businesses involved with so-called distance sales made within the EU—for example, with mail order and internet sales. Distance selling occurs when a taxable supplier sells and delivers goods from one EU country to a customer in another EU country that is not registered or liable to be registered for VAT. Such customers are known as non-taxable persons. They include private individuals and businesses, as well other organizations that are not registered for VAT either because of their size or because they are exempt from having to register due to the nature of their activities.

From July 1, 2021, the country-by-country thresholds of either 35,000 euros or 100,000 euros set by each EU member state for distance selling within the EU have been replaced with a single pan-EU threshold of 10,000 euros. This threshold applies to the total cross-border sales by the business across the EU and Northern Ireland—and not, as was previously the case, on a country-by-country basis. No threshold applies for businesses not established in the EU or Northern Ireland, which have to register immediately when performing distance sales within the EU.

This means that when an EU/NI business (which has cross-border pan-European sales above the threshold of 10,000 euros) or a non-EU business (no threshold applies) sells goods to non-VAT registered customers located in the EU via the Netherlands (for example, from a stock located in the Netherlands), the supplier becomes liable to register for VAT in all EU member states where it has customers.

OSS Registration Possible

Alternatively, the business could opt for the online One-Stop Shop. To ease the administrative burden of businesses having to register in each EU member state where they have customers, there is a new opt-in online OSS quarterly VAT reporting and payment system. This means that businesses falling within the scope of the new distance selling rules in effect from July 1, 2021, are not required to VAT register in each of the EU countries of their customers if they opt for the OSS.

However, the OSS cannot be used to report local sales or intra-community stock transfers for which local Dutch VAT registration is still required. Any sales to customers in the Netherlands are subject to Dutch VAT and should be reported in the Dutch VAT return.

Importers of Low-Value Goods Can Make Use of IOSS

As of July 1, 2021, all imports are subject to VAT unless the IOSS is used. The IOSS is a special scheme for reporting sales of low-value goods—consignments not exceeding 150 euros—imported from outside the EU. Under the IOSS, the importation is VAT-exempt, and the importer charges VAT at the point of sale to the customer and declares and pays this VAT via a monthly IOSS return.

The IOSS allows for a quick release of imported goods, using a “green channel” fast customs clearance, and also for a release of goods destined for customers located in EU member states other than where the goods entered the EU.

Only low-value goods covered by the IOSS can be released into free circulation in the EU member state other than the EU member state of final destination of those goods.

Planning Points

If you import via the Netherlands, you can take advantage of the import VAT deferment, also known as the reverse charge. Appointing a fiscal representative is required if a non-Dutch business wants to take advantage of the import VAT deferral.

The OSS registration provides an opportunity to ease the administrative burden of businesses falling within the scope of the EU distance selling rules in effect from July 1, 2021. Those businesses are not required to VAT register in each of the EU countries of their customers if they opt for the OSS.

The IOSS could be used to simplify imports of low-value goods into the EU and allows the goods to be released in the Netherlands even if the final customers reside in other EU countries.

Next Steps

Engage with VAT advisers to understand the VAT rules applicable to the flows of your goods. If you begin with importing and selling in the EU, then check what your obligations are and what your possibilities are to optimize your VAT and customs position.

Check whether import VAT deferral is an option which would benefit you. If you decide to make use of the import VAT deferral, check what the administrative requirements are and what steps you need to take. Check whether the OSS could apply.

Decide whether you want to use the OSS or prefer to file VAT returns in all EU countries of your customers. If you choose to make use of the OSS, you need to register for it.

Check whether any administrative steps, such as deregistrations and notifications in various EU member states, are required if you choose the OSS. Register for the IOSS if you want to release goods in the Netherlands but also deliver them to other EU countries.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Aiki Kuldkepp is Senior Manager, Tax, with Grant Thornton Netherlands.

The author may be contacted at: aiki.kuldkepp@nl.gt.com