The simplification of VAT rules for ecommerce sellers

In December 2017, the finance ministers of the EU agreed on new tax rules. The goal was to simplify regulations and make it easier for online businesses to comply with VAT obligations.

What does it mean for online sellers and EU countries?

In the future, online retailers won’t have to register for VAT in each EU country. Instead, they will be able to file a single tax return for the entire EU.

The expected benefits of this move include:

• reduced costs for ecommerce businesses
• increased tax revenues of EU countries.

According to Toomas Tõniste, Minister for Finance of Estonia, this revamp of the rules will make the VAT system in Europe fit for the digital economy. He says:

We will achieve both cost savings for businesses and increased tax revenues for the member states. This was a major priority for our presidency.

Saving of €2.3 billion for businesses

According to the new regulations, online merchants no longer have to register for VAT in each of the EU countries in which they trade.

On the basis of information from the European Commission, such obligations cost companies approximately €8,000 for every EU state into which they sell goods.

Now Europe is becoming more of a one-stop shop for the VAT registration of distance sales. A one-stop shop that, according to the Commission’s estimates, will generate:

An overall saving of €2.3 billion for businesses and a €7 billion increase in VAT revenues for member states.

Further, reducing bureaucracy means a considerable reduction of administrative burdens for companies by as much as 95%. This will be accompanied by enhanced administrative cooperation between member states to facilitate the process.

The new rules will reduce the costs of complying with VAT requirements for B2C transactions. VAT will be paid in the member country of the consumer, which will ensure a fairer distribution of tax revenues amongst member states.

Global trends, ecommerce events, selected changes of policies and latest ecommerce studies may all be relevant to the future of your online business so stay on top of the latest news and updates.

Life made easier for start-ups and SMEs

Start-ups and small and medium-sized businesses are expected to benefit from the new rules. Companies with revenue below €10,000 in yearly cross-border online sales will be able to continue applying VAT rules used in their home countries.

There’s another plus point for EU businesses.

Whilst EU companies have to apply VAT regardless of the value of the goods sold, imported goods benefit from the exemption and are often undervalued in order to do so.

In other words, many goods imported for distance sales currently enter the EU VAT-free, resulting in unfair competition for EU companies.

The new regulations remove exemptions for consignments from outside the EU that are worth less than €22. Currently about 150 million of these small consignments are imported free of VAT and retailers tend to abuse the present system.

VAT fraud for distance sales in the EU is estimated at €5 billion per year and the new rules should help reduce it.

Boost your ecommerce sales on international markets

Are you already selling on international markets? If that’s the case, you’re likely to be content with the new VAT regulations in the EU.

If you still haven’t expanded your store internationally, you just need to take a single step to do so. The new rules are yet another incentive for online sellers to test international opportunities.

Maximize your international sales

Many online sellers already receive around 20% – 30% of their traffic from international sources. However, what they often find is that this traffic converts at a much lower conversion rate than their domestic traffic. This is also the case for markets that share the same language.

Here’s the reason why the conversion rate is lower…

Many of the components of localization, beyond translation alone, have not been optimized.

Of course, your website should be translated, but … that’s only the beginning.

You need to know some SEO. You need to know how it affects the discoverability of your products. You need to be aware of the keywords that buyers from specific countries use when conducting their product searches.

This goes beyond translation.

An ideal dictionary match may not have much to do with the keyword that will actually bring you money. The word that will make your product findable for the online buyer.

For instance, the translation of a mobile phone from English into German is das Handy. However, the keywords Germans enter to buy a mobile may be smartphone, Android or iPhone.

The bottom line …

International SEO may be far from straightforward and it … counts. At least when it comes to actual sales figures.

The good news is …

International ecommerce specialists know how to drive foreign buyers to your website, whether they buy from Germany, Italy, Australia or the US.

Interested in our UNIQUE compilation of interviews with ecommerce experts? Download our FREE ebook now!

FREE ebook

Related Posts:

Amazon Advertising: all you need to know [FREE guide]

Top selling items on Amazon in 2023: what to sell online right now

7 ecommerce trends on marketplaces to grow your sales in 2022