Would you like VAT with that?

March 12, 2008 7:45 AM

Is VAT calculated based on the billing or shipping address of an EU customer?

I'm building an e-commerce store for a German client who sells and ships physical goods to consumers (not other businesses) worldwide.

If a customer in Spain purchases a product, they are charged VAT (at the applicable German rate).

But if the same Spanish customer purchases a product and has it shipped to her brother in the US, should VAT be charged?

Thanks

posted by subpixel to work & money (5 answers total)

Assuming that the rules are the same for all EU countries, no (assuming it goes direct to the brother, subject to suitable evidence etc). Supplies of goods to people outside the EU are zero-rated. See UK VAT notice 703 . Obviously this describes the UK position.
posted by Phanx at 8:21 AM on March 12, 2008

From any EU state, VAT (TVA, IVA, MwSt, etc.) is charged to:

- all clients in the same country,
- consumers in other EU countries
- no one outside EU

plus various exemptions varying nationally (as an example: non profit organisations can be exempted from paying VAT under certain conditions)

As far as I know, it's where who you're billing resides that determines what happens to the VAT, so if you're billing a customer in Spain, the fact that the product is then shipped to the US is irrelevant, and VAT has to be be charged.

Have your client check with (or have him give you the contacts of) his german accountant for nation-specific regulations, but if your client is selling exclusively to end-users, my feeling is that the only distinction you have to do is between EU/non-EU countries. Also, for tax reasons, there might be the need for special reporting functions, detailing for instance yearly sales divided for specific countries/areas, etc.

On preview: you definitely want an opinion from a german accountant.
posted by _dario at 8:29 AM on March 12, 2008

Related AskMe
posted by uandt at 8:46 AM on March 12, 2008

In my experience, Phanx is correct. _dario is unlikely to be correct, because if he were people would set up "billing addresses" outside the EU and pay no VAT on supplies in the EU. But you might as well run it past a German accountant or check regulations in Germany online. And as far as shipping is concerned you will need appropriate proof of export: this can be onerous for high-value items, at least from the UK: a receipt from the Post Office or FedEx or what ever may not suffice.
posted by londongeezer at 9:53 AM on March 12, 2008

IANAaccountant, plus I only bill services, both in the EU and outside, so mileage for the OP's client *will* vary.

Re: setting up "billing adresses" outside the EU tax area: some companies do that, actually, last time I checked it was called tax avoidance :)
posted by _dario at 10:03 AM on March 12, 2008