There are various advantages for both start-ups and existing companies with actual shops in starting a web shop. One of these advantages is that the whole world can become a potential customer: the internet and transport are not limited by borders, after all. Unfortunately, the same cannot be said for the various VAT regulations that entrepreneurs offering their services via the internet can encounter. For web shops with Dutch customers only, the situation is clear: both individual and trade customers are charged VAT. Trade customers can deduct this VAT as input tax. The Dutch (web shop) entrepreneur pays the VAT he/she receives – minus VAT on costs incurred – to the Dutch Tax Authorities.
Dutch VAT for web shop customers in Europe
However, the situation changes once web shops acquire customers in other European countries. In these countries, just like in the Netherlands, VAT is charged to individual customers. If a particular product is being supplied, then transport costs obviously also come into the equation. However, these are – unlike what is commonly thought – not always 21%.
Foreign VAT for web shop customers in Europe
When a web shop sells its goods and/or services to a European entrepreneur, the Dutch entrepreneur must then re-direct the VAT to its business customer. But how do you do that exactly? How do you actually know if somebody has placed an order with you as an individual customer or as an entrepreneur? This is far from always being clear with many sole traders – or the European equivalent thereof.
It does not stop at that. Although you have set up a web shop in the Netherlands, it may be the case that you – given the size of your turnover in a particular European country – all of a sudden owe VAT in another European country. You must then register as a VAT entrepreneur in that country and pay VAT. But when precisely do you find yourself in this situation? How do you sort it out? How much VAT are you going to have to pay? Will you end up in a situation where you are going to have to pay “double” VAT? Will this be on a permanent basis or will you no longer have VAT obligations in that EU country if your turnover decreases?
Based on the above, it is clear that taxation rules do not make it easy for the web shop entrepreneur. Incorrect application of these rules can lead to, among other things, incorrect invoices (and, thus, inaccurate record keeping), inaccuracies in VAT charged to customers, or to partial or complete VAT being mistakenly paid – or not being paid – to the Tax Authorities. Some financial consequences can include being refunded less VAT from the Tax Authorities than you are entitled to. Or else that you pay less VAT to the Tax Authorities than you should. As a result, you can find yourself facing possible fines and additional taxes.
VAT for customers outside Europe?
What about customers from outside the EU? The United States, for example, but also those closer to home. What do you do if you have customers, say, in countries such as Switzerland and Norway? Will individual customers in these countries have to be charged Dutch VAT? And trade customers? Will they also have to be charged VAT?
It becomes even more complicated if you are an entrepreneur purchasing goods and services from suppliers based in other EU countries and/or from countries outside of Europe. The same issues described previously crop up again. Your suppliers themselves are grappling in their own country with precisely the same questions that I have outlined above. From this angle too, incorrect invoices and inaccurate processing of VAT can thus lead to unfortunate consequences for your company: your record-keeping messed up, VAT that cannot be refunded, VAT that, according to the reverse-charge system, you must pay to the Dutch Tax Authorities, but do not, etc. etc.
As if all of this is not enough, what happens if you – while on holiday in another country – purchase something or other for your company from the local shopkeeper? Can you get this VAT back or not? How and from whom?
Assistance in filing a web shop’s VAT return
We at DTS have the necessary experience guiding web shops operating in the European and/or international market. At reasonable rates, we assist entrepreneurs in filing correct VAT returns and in making their record-keeping VAT-proof, so that they are compliant with all of their Dutch and European VAT obligations. Additionally, we can check old VAT returns for inaccuracies and, where possible, assist with the refund of excessive VAT payments.