We have a lot of e-commerce clients at MWA who even if they didn’t start selling abroad initially their business has grown and they are now trading in the EU. New clients also come to us with questions about how and if they should be charging VAT as a UK based e-commerce business selling in the EU and we thought we would try and answer some of those questions.

It is important to remember every business’s set of circumstances differs and therefore when it comes to paying VAT abroad and in the EU, it is important to take professional advice that looks at all the different elements of your business.

Brexit has changed the landscape of UK-EU trade, navigating VAT rules for both digital and physical products and interoperating them can be challenging due to the fast nature for change to occur and the complexities of the rules.

This post will outline in summary some of the main VAT responsibilities, marketplace rules, and how different jurisdictions affect your tax obligations—and we will also touch on the tax and VAT implications for UK based e-commerce businesses selling in the USA.

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How is VAT charged on Physical vs Digital Download Products in the UK and EU?

Physical Goods (i.e. not digital downloads)

For UK e-commerce businesses selling physical goods to EU customers, VAT rules depend on where your stock is held and how it is delivered:

Goods shipped from the UK to the EU: 

• B2B : These are treated as exports and are zero-rated for UK VAT and count towards your UK VAT threshold. However, your customers in the EU may need to pay import VAT and customs duties when the goods arrive.
• B2C : There is no UK VAT implication, but you must charge EU VAT in the country of the customer. There is no threshold, so you must register on your first sale, either in each country, or under 'IOSS' for goods <€150 or 'OSS' for goods >€150

If my e-commerce business sells Digital Downloads do I still pay VAT in the EU?