Establishing your business in the European Union can be fulfilling. But VAT compliance is where many foreign businesses go wrong.  The VAT rules of the EU are very strict. The OSS scheme and the IOSS scheme have made things easier, but many non-EU sellers have trouble getting their VAT compliance issues resolved. Let us examine the common errors and ways to outsmart them.

Assuming Marketplaces Handle Everything

When selling on Amazon, eBay, and other marketplaces, it is easy to assume VAT compliance will be sorted out for you. Here’s the twist: marketplaces only handle VAT for certain sales. You have to register and report for VAT if you sell directly on your own site or store goods in EU warehouses, e.g., through Amazon FBA.

Assuming you can hand off responsibility. The smarter move is to check each sales channel independently and verify where you’re accountable.

Delaying Registration

Another common mistake is delaying registration for VAT for too long. The trouble is that once the tax authorities get to you, you will no longer be able to use the simplified schemes OSS or IOSS. You are also often hit with backdated penalties.

Signing up early helps to stay compliant. It also streamlines logistics and prevents surprises that could cost a lot.

Applying the Wrong VAT Rates

The EU doesn’t have a standard VAT rate. Each member state sets its own rate. Some have lower prices for certain goods, and things get complicated fast. Many people wrongly calculate the VAT themselves or apply a flat rate to all their EU customers. This causes mistakes like wrongly billed customers and may upset clients.

The solution is to automate the VAT process using tools or software that integrates with your checkout system to always apply the correct rate.

Ignoring Fiscal Representative Rules

France, Italy, Spain, and other EU states instruct non-EU firms to appoint a fiscal representative. They will be your local contact for tax matters and ensure compliance.

If this requirement is not met, your VAT registration could be nullified and your entire EU operation could be jeopardized. Choosing a trustworthy fiscal representative is not an option in these countries. With this company, you will ensure VAT compliance and stay on the right track.

Overlooking Record-keeping Requirements

Companies must keep VAT records for at least 10 years as per the EU. This includes invoices, transaction logs, and VAT returns. Even if you have been filing correctly, poor record-keeping can get you into trouble during an audit.

Store all your documents from the start. Use cloud storage or accounting software for easy access.

Viewing the EU as a Single Market

Some companies see the EU as one big country. OSS and IOSS make reporting easier. But customer preferences, tax laws, and enforcement can be very different. If you assume that one size fits all, you might miss compliance issues and give customers a bad experience.

Think of the EU as a group of different markets. This helps you customize your business strategy and your compliance strategy.

The Takeaway

Working with a VAT specialist is the best way to prevent such expensive errors. A professional can take care of your VAT compliance. That allows you to concentrate on expanding your company.

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