Usually an EU VAT registration for an EU-company is required when this company is selling goods across EU borders directly to consumers who ordered via internet or catalogues for example -that is known as “distance selling”. Distance selling is possible for Non-EU-companies as well! In order to help to reduce the administrative burden on companies and, further more, to encourage companies to start trading across the European Union, there is a national VAT registration threshold set by each country which can enable companies to sell within Europe without paying any VAT at all, according to the annual turnover.
For example, when you are selling your goods from your UK warehouse to customers all over Europe, the VAT registration is only necessary if the annual threshold limit of the country of import is reached. The most important countries, or rather threshold limits, in this context are:
| Country | threshold limit in local currency | threshold limit in USD |
|---|---|---|
| Spain | 35.000 € | ~ 38.000 USD |
| Germany | 100.000 € | ~ 108.000 USD |
| Italy | 35.000 € | ~ 38.000 USD |
| France | 35.000 € | ~ 38.000 USD |
| UK | 70.000 € | ~ 85.000 USD |
Do not mix it up: it is not the EU VAT number you got when importing your goods in the UK! This number is necessary, so to speak the basic requirement, to do distance selling and actually even to get started on the European market, besides it is necessary for tax refunds and the whole procedures relating to tax law.
If a foreign company is selling below the corresponding thresholds, it does not need to be registered for a VAT number. Once over these limits within the same calendar year, it must apply for a EU VAT number. The good new is that you will not have to step up any foreign subsidiaries. Keep in mind that currently there is no single EU VAT number for FBA sellers of goods. In case of reaching the threshold in different countries you have to consider to register in these different countries.
There is an initial experiment with a single EU VAT registration for providers of e-services to EU consumers since the start of 2015. This may be extended to goods and FBA sellers at some point in the future.
For Example:
Imagine you are VAT registered with your warehouse in the UK and therefore you have a British VAT number. You sell your goods to consumers within the UK at a 20% VAT rate.
You sell your goods to Italy and Spain as well and as long as your sales are below their registration thresholds, you sell to the consumers there at 20% UK VAT and pay the collected VAT to the tax authorities of the UK. If you reach the threshold limit you have to register with the tax authorities in Italy and Spain. Consequently, you will receive Italian and Spanish VAT numbers and pay the Italian or Spanish VAT rate – while selling to the corresponding country – to the local tax authorities.
