Usually, companies don’t restrict their services only to the country they’re based on. To properly earn money, a lot of them turn to the international market and start offering goods and products not only to neighboring places but regions from overseas, too. Distance selling occurs when a supplier sells goods from one state to someone that is not registered for VAT purposes in another country. The supplier is the one responsible for the delivery of the goods. 1stopvat.com notes that each state has specific distance selling thresholds. The question is, what are they?
What do they indicate?
To put it simply, they are a certain limit. If a foreign company is selling below them, they don’t need to register for VAT. But once they are over it within the same calendar year, they must apply for the specific ones that they are exceeding. There are a few things that are included in this:
- Goods sold over the net that are physically supplied are considered to be distance sales.
- Business-to-consumer. Sales to a customer in other states who are not registered for VAT are liable to it in the other country that is registered. 1stopvat.com explains that when distance selling thresholds are exceeding in a particular state, the supplier must register and account for that VAT.
Businesses selling goods to other countries should be aware of these limits. Not paying the proper taxes can result in fines.
Why do they exist?
The main reason these thresholds were agreed upon is to help reduce the administrative burden on companies. This encourages them to start trading across the continent. If a business is selling below this limit, it doesn’t have to register for VAT.
1stopvat.com notes that such distance selling thresholds are good for many new companies that are trying to break out into the international market. It helps them financially in the sense that they don’t have to pay additional taxes that can be a big burden for a start-up.