The Ultimate Guide to eBay VAT
Estimated reading time: 18 minutes.
When you sell online to a global market, you’re opening up your business to a world full of consumers with disposable income.
You’ll also become subject to meeting tax thresholds in multiple economies with different rules (sigh).
And with ecommerce being the lucrative beast that it is, tax authorities in those multiple economies are onto you.
But don’t close up shop just yet. In this guide, we explore all things VAT in the UK and Europe - what it means for eBay sellers like you, and how to get started.
This guide has been updated since the UK’s exit from Europe, and the 2021 Ecommerce VAT Package took effect.
We will cover:
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Disclaimer: before we get started, it’s important to note that this guide is merely that: A guide.
Getting taxes wrong can be detrimental for any business, so it is always best to seek professional advice and get tailored support for your unique circumstances. Check out our trusted accountant directory for help here.
What is VAT?
Value-Added Tax (VAT) is the name of consumer spending tax in the EU.
VAT is a tax imposed on goods at each stage of their supply chain. When value is added to them as products, so is the tax.
VAT has different names throughout the world with varying rules, but it’s the same concept. In Australia and New Zealand, it’s called GST (Goods & Services Tax).
In the US, it’s called sales tax.
Rates and rules differ, but the idea is essentially the same.
Unlike income tax, VAT is not taken from sellers, but is added to the cost of buying an item. It’s a ‘pass-through’ tax, in that the sum should pass through you from buyer to tax authority. You simply hold onto it before you file a tax return - that is, if you need to collect it in the first place.
In Europe, the VAT rate range goes from 17-27% depending on country, with “parking”, “reduced” and “super-reduced” rates applicable to certain consumables.
These are generally necessities like fuel, heating devices, cleaning products, transport, pharmaceuticals, books, and food.
Can VAT change?
Yes it can, so it is important to stay informed about any changes that might affect you.
Back in 2017, the UK’s HMRC cracked down on ecommerce tax compliance. UK-based sellers were at a disadvantage, subject to a tax that online sellers were evading. Anyone caught owing was asked to pay it back, and the HMRC made it clear that they would be more strict on the rules moving forward.
To add to that, after the UK left Europe, more changes came into play. No longer subject to EU regulations, the UK set its own rules - but we’ll cover those later on.
Then there’s COVID-19, an unprecedented global event that has stunted economies and thrown business owners around the globe off course.
New tax policies have sprung up in response to the Coronavirus crisis to help governments deal with the added pressure on businesses, which, thus far, have been largely temporary fixes.
The situation does provide governments with a unique opportunity to overhaul the VAT/GST system, which policy-makers say could “improve the neutrality, proportionality, practical administrability and security of the tax to better deliver for their citizens.” (pwc)
The bottom line? Once you know which countries you need to pay attention to, pay attention - especially now, and for the foreseeable future.
If you’re a little uneasy about managing this all yourself, don’t worry - there are apps that can do this all for you. And people, of course. We’ll get to those.
Do I Need to Register to Pay eBay VAT?
It all depends on what you sell where, and how much of it. Just to be clear, the following are (according to eBay), what you as a seller may be responsible for:
- Paying VAT on eBay selling fees (service).
- Paying VAT on eBay sales (goods).
- Paying income tax on eBay sales (guide to that here).
- Informing overseas buyers about import charges (unless you use eBay Global Shipping, in which case, eBay will inform the buyers).
The factors that determine whether you need to register for VAT in any given location are:
- The original location of your business (or where you live).
- The location of your inventory (there is no threshold for this, any storage counts).
- How much you sell.
The good news for eBay sellers is that eBay has partnered with KPMG to offer their sellers free education and advice about managing VAT. So, if you are ever unsure of your obligations, you have that resource available.
eBay VAT Registration Criteria
At a glance, you will need to register for VAT:
- If you are an established seller in the EU/UK and your business meets the sales threshold of your home country. Some countries have a limit of €0, meaning any trade puts you above the threshold, so you will need to register immediately.
- If you are selling goods which are stored in the EU/UK, you are automatically required to register for VAT there - no threshold exists for this. This also counts for sellers based outside the EU storing inventory there.
- If you sell substantially from one EU country (or UK) to private buyers in another, you might be eligible to pay VAT to the country your buyers live in. This is called distance-selling, and there are thresholds for this.
The best place to start is your home country. Take the time to get to know what’s required of you, the rates of your goods and/or services there, and what might apply to you elsewhere in the EU.
The Pros and Cons of Registering for VAT
Other than, “you’ll be complying with the law” (pro) vs. “you have to keep track of taxes” (con), there are a few other pros and cons you might be interested in as you decide whether to register for VAT.
Pros:
- When smaller businesses register for VAT, they add a layer of credibility and presence which will help them to be taken more seriously by larger companies.
- Once you’re registered, you don’t have to worry about meeting the threshold - you’re done. Instead, you can focus on growing your business.
- You can claim tax back. Tax-deductible expenses are designed as an incentive for you to grow, so use them.
- If structured carefully, VAT can help boost your cash flow, because in most cases you’ll have a few months before you need to hand it over to the government.
Cons:
- Once you are VAT registered, you will need to file returns on a regular basis.
- Tax apps or accountants are hugely valuable resources, but are still a cost to your business.
- If you do it yourself and get it wrong, you may be subject to nasty fees and interest.
- You’ve got another, complex string on your bow that you need to manage.
In essence, if you want to grow, you need to register for VAT. If you don’t mind stunting your growth to stay under tax thresholds, that’s ok too, but there are a multitude of tools out there to help you manage taxes well and allow your business to flourish.
Distance Selling
Under the VAT Registration Criteria section, we mentioned distance selling. This refers to when goods or services are sold without any physical interaction between buyer and seller.
Basically, almost all ecommerce.
It has become easier than ever to trade across the world, spanning countries and tax jurisdictions - so authorities needed to come up with a plan.
Taxing every seller who has any business in their country would not only be unfair to smaller businesses with negligible sales, but practically impossible to administer. And not collecting any taxes at all would disadvantage local sellers and the government in missed revenue opportunities.
Where is the compromise?
Enter distance selling thresholds. A revenue sum (in one calendar year) that you must exceed to be liable for tax.
This protects both sides of the coin, so it’s important to stay on top of where you fit in.
You should be registering in your home country and paying VAT there, but you’ll also need to check where else you might meet VAT thresholds and count as a distance seller.
As a result of the new VAT updates from July 1, 2021, all EU member states have the same distance-selling revenue threshold of €10,000, which makes things a bit more simple.
How Much is VAT?
The rate applicable to you will depend first on the country, and then what kinds of goods and services you are selling.
If you don’t have inventory in other countries or meet their tax thresholds, you will only need to worry about the VAT requirements of your home country. But if you do have inventory or meet thresholds abroad, buckle up.
The EU has a broad set of VAT regulations that its member states adhere to.
The standard rate must be 15% or higher, and they can have up to 2 reduced rates applicable to certain goods and services. This is set to change in 2022.
There are a few exceptions for instances where countries had certain measures in place before joining the EU. Other than that, within these parameters, the countries set their own rules.
For most of your products on eBay, the standard VAT rate will apply. For a list of the products which may incur reduced rates, check out the official EU guide, last updated in January 2020.
Below is a snapshot of VAT rates for EU member states. It lays out the standard VAT rates, plus the thresholds that you would need to meet to pay taxes - both as a resident, and distance seller.
Click on the countries for their official sites to register or get the most up-to-date information.
This table was up-to-date as of June 2021.
| Country | VAT Rate* | Resident VAT threshold | Distance-selling VAT threshold |
|---|---|---|---|
| Austria | 20% | €35,000 | €10,000 |
| Belgium | 21% | €25,000 | €10,000 |
| Bulgaria | 20% | Nil | €10,000 |
| Croatia | 25% | HRK 300,000 | €10,000 |
| Cyprus | 19% | €15,600 | €10,000 |
| Czech Republic | 21% | CZK 1 million | €10,000 |
| Denmark | 25% | DKK 50,000 | €10,000 |
| Estonia | 20% | €40,000 | €10,000 |
| Finland | 24% | €10,000 | €10,000 |
| France | 20% | €82,800 (goods) €33,200 (services) | €10,000 |
| Germany | 19% | €22,000 | €10,000 |
| Greece | 24% | €10,000 | €10,000 |
| Hungary | 27% | HUF 8 million | €10,000 |
| Ireland | 23% | €75,000 (goods) €37,500 (services) | €10,000 |
| Italy | 22% | €65,000 | €10,000 |
| Latvia | 21% | €40,000 | €10,000 |
| Lithuania | 21% | €45,000 | €10,000 |
| Luxembourg | 17% | €30,000 | €10,000 |
| Malta | 18% | €35,000 / €24,000 / €14,000 | €10,000 |
| Netherlands | 21% | Nil | €10,000 |
| Norway (non-EU) | 25% | NOK 50,000 | N/A |
| Poland | 23% | PLN 200,000 | €10,000 |
| Portugal | 23% | €12,500 | €10,000 |
| Romania | 19% | ROL 220,000 | €10,000 |
| Slovakia | 20% | €49,790 | €10,000 |
| Slovenia | 22% | €50,000 | €10,000 |
| Spain | 21% | Nil | €10,000 |
| Sweden | 25% | SEK 30,000 | €10,000 |
| Switzerland (non-EU) | 7.7% | CHF 100,000 | N/A |
| United Kingdom (non-EU) | 20% | £85,000 | £70,000 |
Sources: Avalara (1), Avalara (2), Europe Taxation Resource, National Customs Websites.
*The “standard rate” without any exemptions or reductions applied.
Where do customs charges and import tariffs fit in?
If you are registered for VAT in Europe and you sell to customers outside of the EU, any applicable taxes will be picked up at the buyer’s end.
You don’t need to charge the VAT on those purchases, because customs will apply any fees or tariffs which the buyer will have to pay in order to pick up the item.
The same goes if you are outside of the EU and selling to customers there. For example, if you sell from eBay in the US to a customer in the UK, you will not apply UK tax.
Instead, UK customs will ask the recipient to pay any necessary import charges before they collect the item.
As of July 1, 2021, low-value consignments (less than €150) can be tracked via the new Import One-Stop Shop system. This makes customs faster, charges more transparent for customers, and a smoother process all-round.
These are simplified examples - every seller will have unique circumstances. It is important to get tailored advice from an accountant where possible.
The UK: What’s Changed Since Brexit?
If you are new to ecommerce and just learning the ropes now, rules changing for the UK won’t mean much to you. But if you’ve had nexus there for a while, you will likely need to change something about your VAT remittance.
As of January 2021, new rules came into play:
- For consignments (orders to your customers) entering the UK worth less than £135, VAT is now charged at checkout rather than at import.
- The Low-Value Consignment Relief, which excluded goods under £15, has been scrapped.
- If the seller has a UK VAT number, they may be able to claim back VAT paid on import, after orders have cleared customs.
What sellers need in order to comply with the new UK VAT laws:
- A UK VAT number if you have business there. For B2B businesses, if the UK shopper provides their own UK VAT number then this is not required.
- All businesses need to collect VAT at the point of sale for orders of £135 or less. This is the value of the item before anything extra (like shipping, insurance or taxes) is added on top.
- For orders over £135, VAT should be paid at the point of import.
- VAT must be remitted to HMRC on a quarterly basis.
Find out more about selling into the UK via online marketplaces from the HMRC website.
How Do I Pay VAT?
Once you know the countries with which you have economic nexus - a substantial link that makes you eligible for taxes - it’s time to register with those countries.
Use our table in the How Much is VAT section to find the official sites you need - most of them have English translations, but if not, you may need help from Google Translate, or ideally, an experienced accountant.
NB: Another part of the 2021 Ecommerce VAT Package is the new marketplace facilitator deemed supplier rules. What this means for sellers is that the platforms may be responsible for the collection and remittance of VAT in some circumstances. You might find that eBay handles everything for you.
In the cases that it doesn’t, use the below instructions.
What you’ll need to register for VAT
Below are the things you’ll need on hand when registering for VAT in the UK, as an example:
- Your tax identifier (e.g. national insurance number in the UK), which you may need to apply for as part of the process.
- Any official business documentation.
- Any documentation that might relate to previous businesses you have had.
- Your business bank account details.
- If you acquired the business, any records of that transfer.
Please consult the official authorities in each country for their unique requirements. The time it takes to get you set up could be a few days or weeks, depending on the country.
For a non-ecommerce business, it is recommended that during the time you are waiting for your registration to come through, you charge extra to account for VAT in the interim. For you as an eBay seller, however, this probably isn’t necessary.
Pending advice from your accountant, you are better off operating business as usual until you are officially registered, and can then collect VAT the right way.
Collecting VAT on eBay items
Once you have registered for VAT in any applicable countries, you will need to add VAT to your listings and display your number on your eBay account. VAT cannot be added after a customer has ordered something, so make sure you update listings ahead of time.
You can add more than one country-specific eBay VAT number so that your appropriate buyers see the correct information. Getting an eBay VAT invoice appears to be a real bugbear for many buyers online, so as you go through the process of getting registered, it might be worth taking a moment to learn how to create one.
You will need to keep track of how much VAT you collect from buyers. Simply integrating your eBay Managed Payments account with your accounting software won’t do this for you, but by adding A2X into the mix, this will all be broken down automatically.
So, if you are thinking of self-filing, check out A2X for eBay to see where you can save time, money, and considerable headaches.
Ways to file VAT returns
You have a couple of options when it comes to filing for tax returns. You can either manage this yourself, or you can outsource it to an accountant. Either are perfectly acceptable and of course come with their own pros and cons.
There is now a One-Stop Shop (OSS) system for sellers that need to file VAT with more than one EU member state. If you wish to, you can use it to file one return for all of Europe. If you don’t want to use this, you’ll need to register with each state and file with them individually.
eBay offers free consultation to its sellers with the help of KPMG. To benefit from this advice, see their contact instructions here.
A2X has a directory of trusted accountants located across the world. If you are interested in talking to an expert on a one-off or ongoing basis, find an accountant here.
To find out the exact due dates of your VAT returns, consult the official pages of the relevant countries. If you are self-filing, it might be worth setting yourself calendar reminders a few weeks out so that the dates don’t creep up on you.
Your EORI number
Any seller importing products into Europe will need an Economic Operators Registration and Identification (EORI) number. This is required by the EU and also goes for sellers not based in Europe themselves, in certain situations.
Customs use this number to track and identify cargo as it is imported, and if the number is missing, they may hold cargo at the border and charge you for storage until you provide it.
From 2021, you will also need this number to move goods between the UK and EU.
You can apply for the number in your home country. Use our table to find links to the customs websites for each country. EORI numbers can be processed within 48 hours but may take a few days.
Why use tax apps for automating eBay VAT returns
Feeling a little overwhelmed by the thought of handling all this yourself? Fortunately, numerous apps have been designed and created specifically to alleviate this problem.
Companies use tax apps to automate the tracking of:
- Sales thresholds
- Tax liabilities
- Tax returns and filing
- Other charges to customers
Your goal as an ecommerce seller is probably to grow as quickly as you can, so it makes sense to have solid foundations in place that can support this.
Charging VAT on eBay items requires an agile system and strategy. You need to know how much you collected from whom in order to pay it back to the right place, and you need to stay up-to-date on requirements, rates and changes - especially in this post-Brexit and COVID-19 landscape.
Tax apps do all this for you.
Most will integrate with your accounting software so that everything becomes automatic. And, if you sell on more channels, they can bring all your information together for you in one place. In many cases, if one of your channels meets a tax threshold, it automatically deems your other businesses liable for tax too.
Check out these tax apps which integrate with the most popular accounting software and A2X, to ensure VAT accuracy and success every year.
VAT on eBay vs. VAT on Amazon (and Other Platforms)
VAT (or sales tax as it’s called in the US), is not something imposed by marketplace facilitators. It’s determined and administered by the government, so in essence, dealing with VAT is similar no matter which platform you use.
It’s the location and quantity of your sales that makes the difference.
There are variations however, in the types of support available. For larger sellers that have to deal with a multitude of rates and returns, this could be significant.
Amazon offers more fulfilment options for Europe than eBay, and its fulfilment extends beyond Amazon products. So, if you sell on both Amazon and eBay, you should be able to rely on FBA for all your fulfilment across both channels. This is an advantage of selling on Amazon.
Remember how one of the criteria for registering for tax is storing inventory in a European country? Well, by using Amazon’s FBA system or eBay’s Global Shipping Program, you won’t need to worry about that piece of the puzzle. So again, if you can put all your eggs in the FBA basket, this might streamline your processes. eBay’s GSP will only ship eBay items.
If you do sell on Amazon and would like more information about choosing your best fulfilment option, check out our guide here on VAT for Amazon sellers.
Aside from fulfilment options which save you from one of the registration criteria, collecting VAT on eBay items and collecting VAT on Amazon items is essentially the same. Costs should be added before completion of sale, and depending on the locations of both you and your buyers, you will need to pass on that VAT to the relevant tax authority.
Find Your Accountant with A2X
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Head to our directory to filter through our accountants, based on where they are, their offerings, and their tax expertise.
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Accounting for eBay sales comes with a unique set of challanges and opportunities. Discover the key challenges sellers face, the taxes and fees, and a free setup checklist.
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