Distance sales relate to goods sold from a business to a customer without a face to face interaction. For example, goods purchased by an individual either online, over the telephone or via mail order would be considered a distance sale.
"However digitised goods, that is goods for downloading by the customer via the internet are considered to be services within the meaning of Section 33(5)(k) of the VAT Consolidation Act 2010 for VAT purposes.” - Source: revenue.ie.
When a distance sales transaction occurs between a business in one EU Member State and a private individual customer in another EU Member State, specific VAT rules apply.
For the distance sales of goods between Member States, VAT must be accounted for in the Member State of the supplier, unless the distance sales threshold in the Member State of the customer has been exceeded. If the annual value of a supplier’s sales to customers in any Member State is in excess of that State’s threshold, the supplier must register for VAT in the customer’s Member State. However, the supplier has the option of registering for VAT in the customer’s Member State regardless of whether the threshold in that State has been exceeded.
Distance sales of goods thresholds vary from State to State. While there are a number of exceptions, the majority of EU Member States have a distance sales threshold of either €35,000 or €100,000.
The latest list of distance sales thresholds for each Member State can be found here.
Prior to 2019, the distance sales of services, such as digital downloads, telecommunications and broadcasting services, were always subject to VAT in the Member State of the customer.
To prevent suppliers from having to register for VAT in multiple Member States, the EU introduced the MOSS (Mini One Stop Shop) scheme, which allows suppliers to report the VAT due in any Member State via a quarterly online declaration in their home State. Additionally, the VAT invoicing rules for the supplier’s Member State apply when the supplier uses the MOSS system.
Since 1 January 2019, distance sales of services between a supplier and customers in different EU Member States that do not exceed €10,000 in a calendar year are now subject to VAT in the supplier’s Member State. However, the supplier has the option of registering for VAT in the customer’s Member State regardless of whether the €10,000 limit has been exceeded.
Suppliers should report the value of their distance sales to and from Ireland using the relevant Intrastat box on their Irish VAT return.
VAT which is not reported under the MOSS system must be calculated, reported and paid to the tax authorities in the relevant Member States according to each State’s VAT regulations.
From 1 January 2021, the MOSS system for reporting VAT due in a customer’s Member State will be extended (and renamed OSS) to include the distance sales of goods as well as services. The €10,000 threshold for reporting VAT to a supplier’s Member State will apply, as will the supplier’s Member State invoicing rules. This will significantly reduce the administrative burden associated with the distance sales of goods which should translate into real savings in terms of costs and time.
At EisnerAmper Ireland our team of dedicated tax specialists are on hand to help you negotiate the evolving landscape of cross-border tax legislation. Contact our Tax team for expert advice on these and other changes to the distance sales tax rules which may be of benefit to your organisation.