From July 1, the new regulations for sales tax reform will be implemented in the European Union. Many small and medium-sized online retailers suddenly become liable for sales tax in other EU countries. As the previously applied delivery thresholds, which ranged from €25,000 to €100,000 depending on the EU member state, will be abolished and replaced by a single EU-wide delivery threshold – that is only €10,000.
Therefore, from July onwards, many retailers will have to deal with the fact that they exceed the delivery limit, and then become liable for sales tax in the EU countries to which they send their shipments. The goal is to simplify tax debt reporting and settlement through single window procedures, through which, for example, a German trader can declare and pay their tax debts in France, Austria and Denmark centrally via the German central federal tax office.
But many online retailers are still not sure. How is the delivery threshold calculated? Do you count shipping costs, sales to EU third countries, or local German sales? Does the delivery limit apply only per calendar year or across years? These questions have reached the editorial board in the past few days. We want to answer that below. For all other questions, we also recommend the detailed FAQ on Sales Tax Repair and the department store.
Only relevant EU cross-border sales
Only sales within the EU that are made across borders are considered significant for the delivery threshold. Domestic sales are not taken into account when calculating, after all, the maximum amount of 10,000 euros relates to sales tax obligations in other EU countries. In addition, only B2C sales – that is, to consumers – are covered by the regulation. Sales in third EU countries, such as the USA, are not relevant to the calculation of the delivery limit and are not subject to new regulations.
EU-wide sales are added together
However, all EU-wide sales are added together, and there is no delivery limit of €10,000 per EU country. A German online retailer that sends goods to Austria for 4,000 euros, to Belgium for 3,000 euros and to Poland for 5,000 euros has crossed the delivery threshold. From a shipment over the €10,000 mark, it is subject to sales tax from the first cent in all EU countries to which you send only one additional shipment.
Net costs and related calendar years
The threshold of €10,000 is calculated on the basis of net sales. The deciding factor is the net value of shipments sent to consumers in other EU countries.
In addition, the delivery threshold is only valid for one calendar year. Sales from different years are not added together. Anyone who sold goods worth 5,000 euros in other EU countries in 2020 and achieved net sales of 7,000 euros in 2021 did not cross the threshold.
But be careful: if you exceed the threshold of 10,000 euros in 2020, you will be responsible for sales tax in 2021 in every EU country to which you deliver the shipment. The new regulation states that the previous calendar year and the current calendar year should always be used to assess the delivery threshold.
Update (June 16, 2021, 4:11 p.m.): Shipping costs are relevant to calculating the delivery limit
An earlier version of this article stated that shipping costs are not taken into account to calculate whether the delivery threshold has been exceeded. However, it is true that shipping costs are taken into account and should be included in the €10,000 threshold.