Who Collects the VAT? (Infographic)

When it comes to selling internationally via the internet, how are you handing the Value Added Tax (VAT)?

Have you ever stopped to consider

Q Should I be charging and collecting VAT for this sale?

Q Is my customer paying the VAT?

Q How do I know who is responsible?

If you find yourself asking any of these questions, know that you are not alone. The key for you as an international seller is to be sure when you have a responsibility to charge local VAT, collect it and remit it to the local tax authorities.

For non-EU sellers who sell to EU customers, two situations normally arise:

1. The courier company collects local VAT from the customer, i.e. the customer pays the VAT when the goods arrive on their door-step. In this situation the seller has no responsibility to collect the VAT.

2. The seller collects VAT from the customer at checkout. In this situation the seller needs to register for VAT in the country where the customer is located and file regular VAT returns.

Which situation applies to you depends on the logistics scenario you choose. For example if you are direct shipping from the US to a customer in the UK often the UK consumer will pay the local VAT. However, if you are a US seller using Fulfilment by Amazon (FBA) for orders to UK customers, it is likely you need to charge UK VAT at 20% on sales, collect that and remit it to the British authorities.

To make things clearer Meridian Global Services has put together an info-graphic.  This graphic provides a shortcut to understanding who is responsible for collecting and paying the local sales taxes (Value Added Taxes - VAT) on international sales. Although the graphic is designed to help online sellers who are currently selling internationally, it is equally useful for those considering their first international sales.

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