Value Added Tax and delivery thresholds

Dr. Roger Gothmann
Dr. Roger Gothmann
  • 12 min. Lesezeit
Value Added Tax and delivery thresholds

For e-commerce merchants, a regular review of the current status of their own delivery thresholds should be mandatory.

Why this is important and what you need to bear in mind is shown in this post on the subject of cross-border mail order and delivery thresholds.

First of all we would like to point out that Taxdoo is now an official partner of DATEV and can provide you with the most advanced FiBu interface for all online revenues and Amazonfees – see here.

Classic to-DATEV converters cost unnecessary time, money and carry risks – see here.

In the following we would like to point out two very common mistakes in dealing with delivery thresholds, which can cause you a lot of trouble and cost you money if in doubt.

What was the mail order regulation again?

Basically you have to pay the Value Added Tax tax office you are familiar with for your deliveries to the domestic tax office, i.e. in the so-called country of origin of your delivery.

However, this principle applies only to a limited extent to cross-border supplies of goods to private customers in the EU. If your sales exceed a certain threshold (the so-called delivery threshold), the place of delivery moves to the country where your customer is located (country of destination). In practice, this rule is called the mail order rule and is intended to prevent tax dumping: Without it, many traders would settle in the EU member states with the lowest VAT rates.

The value of the delivery threshold should in principle be 100,000 euros. The Member States may, however, reduce this amount to 35,000 euros if they can justify this on economic policy grounds. Almost all Member States have now made use of this exemption. Most recently, France lowered its delivery threshold from 100,000 euros to 35,000 euros on 01.01.2016.

How do delivery thresholds work?

At first glance, the functioning of delivery thresholds appears simple: If your sales exceed the amount of the respective delivery threshold once, the place of your deliveries shifts to the country of the recipient of the service and you have to pay for yours Value Added Tax there.

Gross or net?

The delivery threshold is always measured on the net amounts and is always related to the calendar year. This includes the remuneration for the goods as well as the shipping and packaging costs. Deliveries to entrepreneurs (B2B sales) are not included in the calculation. This means that in order to monitor the delivery threshold of the individual countries, you must deduct the VAT rate applicable there from the final prices. The range of sales tax rates in the EU currently ranges from 0% to 27%. If your net turnover exceeds the value of the delivery threshold of the country to which you are shipping, the following rule applies, which was finally agreed upon by the member states in 2002 (guidelines from the 64th meeting of the VAT Committee) after previously differing treatment:

The turnover with which it exceeds the supply threshold and all subsequent transactions are taxed in the country of destination.

The following example illustrates this:

Let us assume that you deliver coffee worth 34,990 euros (net) to France between January and October. You pay tax on this turnover in Germany and pay it Value Added Tax to your tax office. Please note that coffee deliveries in Germany are subject to the reduced VAT rate of 7%.

If a French customer now orders another kilo of coffee from you in November at a (net) price of 15 euros/kilo, you are exceeding the delivery threshold to France (35,000 euros). This means that you will have to pay tax on this and all subsequent sales in France. The VAT rate for coffee in France is 5.5%.

How long am I liable to pay tax abroad if the delivery threshold has been exceeded?

Once you have exceeded the supply threshold of a Member State, you will have to pay tax there on all subsequent supplies in that calendar year. This also applies to all subsequent deliveries in the following calendar year – even if your net turnover in the following year no longer reaches the delivery threshold. The following example illustrates this:

A trader who exceeds the delivery threshold to France on 01.12.2016 must tax all deliveries in December 2016 in France at the tax rate applicable there. Even if his turnover does not exceed the delivery threshold to France again next year, he must still Value Added Tax subject all deliveries to France to French tax in the 2017 calendar year.

From 01.01.2018 at the earliest, he can Value Added Tax subject his deliveries to France – if they were below the delivery threshold again in 2017 in Germany – to this and declare these sales to his home tax office.

Exception: Excise goods and new vehicles

The application of the distance selling arrangements does not apply to excise goods and new means of transport. Excise goods include mineral oils, alcohol and alcoholic beverages and tobacco products. If you sell them to private individuals in other EU countries, you are obliged to register in the country of destination from the first transaction and must declare them Value Added Tax there.

Waiver of the delivery threshold

The sales tax law gives you the possibility to waive the application of the delivery threshold in a certain country. If you do so, you will not care about the amount of the first turnover and will be taxable in the country of destination. You can decide this individually for each EU member state.

When is a waiver useful?

A waiver is always useful if the tax rate in the destination country is lower than in the country of origin and you are already registered for tax in the destination country. The following example illustrates this:

If your goods are shipped from Poland via a Amazonwarehouse, the standard tax rate for your deliveries from Poland to Germany is 23% if you have not exceeded the delivery threshold to Germany (100,000 Euro). Since the standard tax rate in Germany is 19%, your margin will be reduced accordingly until you exceed the delivery threshold. In this case it makes sense to waive the delivery threshold from the beginning.

Note: In this example, you will probably still be required to submit Value Added Taxpre-notifications in Poland – even if you only have shipments from Poland to Germany. Due to the use of storage facilities in Poland, your declaration obligations and the associated costs will not be completely waived. More information can be found in our article on Amazon FBA and Value Added Tax.

You must apply for the waiver of the delivery threshold to the tax office, which loses the right of taxation. In the above example, you would therefore have to inform the tax office in Poland (Warsaw), as your deliveries to Germany will no longer be taxed in Poland but in Germany.

This is often done informally. However, in some countries, such as Poland, it is a very formal process. There, you can only declare the waiver with the help of a form (VAT-21) and with 30 days notice. Furthermore, the Polish tax authorities require proof that you are Value Added Tax actually paying the tax in the country of destination. As a rule, proof of tax registration in the country of destination is sufficient.

Can I waive the delivery threshold at any time?

This is partly determined differently by the Member States. In principle, the waiver always applies to the entire calendar year. Therefore, this option should only be considered for future calendar years.
In Poland, for example, a retroactive waiver of delivery thresholds is not possible. The option should therefore always be well considered and planned for the long term.

How long am I bound by the delivery threshold waiver?

VAT law stipulates that you are bound by the waiver for at least two calendar years. However, individual Member States have the right to extend this period.

You would therefore be bound by your waiver for a longer period of time. This is disadvantageous if, in the above example, Germany would increase the VAT rate from 19% to over 23%. The described advantage for your margin would turn into a disadvantage.

Supply thresholds in the EU

The following table shows the current delivery thresholds in the EU (source, status: 01.07.2017).

COUNTRYCURRENCYDELIVERY THRESHOLD
BelgiumEUR35.000
BulgariaBGN70.000
DenmarkDKK280.000
GermanyEUR100.000
EstoniaEUR35.000
FinlandEUR35.000
FranceEUR35.000
GreeceEUR35.000
IrelandEUR35.000
ItalyEUR35.000
CroatiaHRK270.000
LatviaEUR35.000
LithuaniaEUR35.000
LuxembourgEUR100.000
MaltaEUR35.000
NetherlandsEUR100.000
AustriaEUR35.000
PolandPLN160.000
PortugalEUR35.000
RomaniaRON118.000
SwedenSEK320.000
SlovakiaEUR35.000
SloveniaEUR35.000
SpainEUR35.000
CzechCZK1.140.000
HungaryEUR35.000
United KingdomGBP70.000
CyprusEUR35.000

Common misconception I: One delivery threshold per country of origin?

Which is often (also by many tax consultants) overlooked: The delivery threshold is always calculated from the point of view of the country of destination – the country to which your goods are shipped. Some software solutions wrongly give the impression that delivery thresholds must be calculated from the perspective of the country of dispatch (storage country).

There is only one delivery threshold per EU Member State.

If you send goods from several countries to another EU country, you have to add up these sales in order to calculate the delivery threshold. The following example illustrates this procedure:

You run your own online shop and sell goods worth 25,000 euros (net) to Austria this year. The goods will be shipped from your German warehouse. Additionally you sell the same products via Amazon Marketplace. You use a warehouse Amazon in Poland from which goods worth 12,000 Euros (net) are shipped to Austria in the same year.

The delivery threshold in Austria is 35,000 euros. Have you exceeded this? Yes, because there are no separate delivery thresholds “Germany-Austria” and “Poland-Austria”, but only one delivery threshold to Austria. You have exceeded this threshold by 2,000 Euros, so that all subsequent deliveries from Germany and Poland to Austria are taxable there as well.

If a tax authority has a different view here, we recommend that you lodge an appeal and refer directly to the Value Added Tax System Directive to appoint.

Common misconception II: Foreign registrations and delivery thresholds

In particular Amazon-dealers who have activated the program Pan-European shipping by Amazonare faced with a complex problem.

Due to the use of warehouses in 6 foreign member states, they have to register for tax purposes in these countries – including Great Britain (GB). We have already discussed this problem in detail in another blog post.

But what does this have to do with delivery thresholds? Are they no longer relevant if you are already registered in the country concerned?

But, in principle, registration abroad does not change anything about the delivery threshold regulation!

But be careful: there are exceptions. Especially in GB you have to consider the following:

In GB, the legal regulation applies that a mail order company that is tax registered in GB must also pay tax there (i.e. in the country of destination) on all its deliveries from other EU countries to GB – regardless of whether it exceeds the delivery threshold to GB or not.

The following example illustrates the problem:

OH GmbH is a mail order company for electronic accessories and has chosen the Pan-EU program from Amazon OH GmbH uses the warehouses of Amazon seven EU countries and had to be registered for tax purposes in all countries. At the end of the year, OH GmbH’s tax advisor evaluates all sales in order to check whether delivery thresholds have been exceeded.

Among other things, he notes that deliveries to private customers with a net value of EUR 20,000 have arrived in GB from Poland. In addition, goods to the value of 30,000 euros were delivered from Germany to private customers in GB. The tax adviser notes that in his opinion the delivery threshold according to GB (70,000 pounds) was not exceeded and that the deliveries were correctly taxed at 23% (Poland) and 19% (Germany).

However, the tax consultant made two mistakes here:

  • If delivery thresholds are actually exceeded, an audit at the end of the year is much too late. You will already have to pay tax on the foreign Value Added Tax sales with which you exceed the delivery threshold (as well as all subsequent ones). Therefore a permanent monitoring is mandatory.
  • If, for example, deliveries to France had been involved, the tax consultant would have been correct with his calculation. However, since OH GmbH is already registered in GB, it must Value Added Tax subject all deliveries to this country to British law, regardless of the British delivery threshold. This means: Deliveries from Poland (20,000 Euros) and Germany (30,000 Euros) to GB must be Value Added Tax taxed with 20 percent British tax and paid in GB!

Taxdoo: Automated Value Added Tax in online trading – including monitoring of delivery thresholds

Taxdoo automatically obtains data from AmazoneBay and the most common ERP (e.g. Afterbuy, Billbee, plentymarkets, JTL or Xentral) and shop systems (e.g. Shopify), prepares them for VAT, transfers them to financial accounting and can also report them abroad.

Automated reporting in other EU countries is possible from 79 euros per month and per country, in addition to a basic price for data preparation.

Simply click here or on the button below and book a live demo in which we personally explain the advantages of our automated Value Added Taxcompliance to you and/or your tax advisor via screen transmission.

Weitere Beiträge

29. April 2022

VAT in the Digital Age – The Next VAT Reform for E-Commerce?

What the EU has planned sounds very promising. VAT returns and paying VAT in EU countries could become simpler and more digitalised....
Dr. Roger Gothmann
Dr. Roger Gothmann
  • 12 min. Lesezeit

One-Stop-Shop (OSS) EU VAT for E-Commerce

The One-Stop-Shop is part of a significant EU VAT reform for e-commerce. Find out everything you need to know about it here.
Dr. Roger Gothmann
Dr. Roger Gothmann

VAT identification number and country of origin for Intrastat reporting: New requirements from 2022

The Intrastat declaration is probably one of the least popular types of declaration that companies are required to submit for their cross-border...
Dr. Roger Gothmann
Dr. Roger Gothmann
  • 7 min. Lesezeit