Expert Advice on VAT:
Unlike sales tax in the United States, the VAT requires paperwork, registration, and price adjustment. The VAT has the capacity to affect your business on several fronts. Here is a brief explanation on the VAT and what it means for sales in the EU.
What is VAT?
VAT is Value-Added Tax, which is a tax that is added based on the type of product that is sold and represents the value added to the product at each phase of manufacture. Each country in the EU has a different VAT based on what their government views as correct. This acts very much like sales tax in the United States, except that the price at retail is usually shown as the price of the good with the VAT already factored in.
Is it obligatory?
Absolutely. For every product sold in the EU at a distance by a business that sells over a certain threshold per year (which varies by country), and by any country that keeps products in Europe for sale within the EU must include VAT on the final price of their product, and pay this tax to the government in that country.
You need to apply for a VAT number, either online or via mail. Getting your VAT number can take up to 6 weeks. This is a number you’ll have to include on your invoices when you sell in Europe. If you use an E-fulfillment service, you have to register your VAT in the country where your merchandise is held (you can still sell to other countries in the EU).
How do I add the VAT?
You can add the VAT directly to your invoice as well. You need to check depending on the country that you are selling to, and add that amount to your final price. Unlike American sales tax, prices for products sold in Europe have the tax included (with the exception of some business to business transactions and services). We highly recommend including the VAT into your final price, as European customers will expect this, and leaving the tax until the final step in payment could provoke abandoned carts.
Even if your E-commerce sells to European customers and delivers from the US, you will still be affected by the VAT. The VAT comes into play when someone purchases from your store and had your products delivered in Europe. The VAT is exonerated so long as the amount of the merchandise purchased is inferior to 150€ (or currently $166). This customs tax is normally up to your customers to pay upon delivery of the merchandise, which can be an unpleasant surprise for those who aren’t expecting it. Staying under the threshold of 150€ can drive down your cart prices and final sales.
Our services offer a step by step method to getting your E-commerce ready for European export, so we will handle getting your company registered for the VAT and getting your number to help you pay for this tax. We will also work with you on translating your prices so that they include the VAT, but are still competitive in regards to your competition. We will set up a legal representative for you and help you pay your taxes so that you can do business in Europe legal and in security.
Are you ready to start exporting to Europe?
There are several things to consider and research before exporting to Europe. Market tendencies, laws, regulations, and cultures are varied over the European Union. We want to help you be as prepared as possible in your venture to international markets, so we’ve provided a list of things to consider before you dive in:
International Export Checklist
Research the international markets you want to export to. Narrow your market down to the country that has the highest demand (we recommend visiting the country for yourself to get a feel for consumers, culture, etc).
How compatible is your website for international sales? Consider how you will market your product overseas. Does your web site have the possibility to change to reflect international language/taxes/currencies? How easy would it be to implement this?
Investigate laws and regulations in regards to your product: tariffs, import taxes, VAT, product liability laws, packaging regulations, etc.
Think about after-sales support you’ll need to offer to international customers.
Mistakes to avoid:
When making your business international and exporting to Europe, there are several mistakes that are easy to make, but costly for your business. Failing to pay attention to the details can result in fines or having the delivery of your merchandise blocked. Here are the 6 most commonly made mistakes:
- Underestimating legal procedures and documentation.
- Business in Europe can seem complicated to those who are unfamiliar with the international documentation needed. Forgetting to research the proper documentation needed for your business can delay sales and take more time than originally planned.
- Not researching the target market, culture and language
- Making your business international by targeting a new market in a different culture, and sometimes different language is no easy feat. We recommend having someone on the ground who can act as a liaison for problems that might arise, and we recommend spending a bit of time to do some hands-on research into consumer tendencies in your targeted country.
- Thinking that you’ll slip through the cracks when it comes to regulations
- Cutting corners on regulations could cause major problems for your business in Europe, and certain countries are stricter than you might imagine. It’s easy to hit the sales thresholds for the VAT registration, which vary by country. Getting fined and having your merchandise blocked is a bad start to an international business venture!
- Ignoring supply chain issues for your product overseas
- Will you have your supplier deliver directly to warehouses in Europe? If so, will your merchandise comply with European regulations directly from the manufacturer or will there be some work needed in between? Will you have your merchandise sent to the US and then send it internationally? What would be more cost effective? What would make things easier for your clients? These are important questions that could effect delivery times and prices of your products.
- Not getting an export license if it’s necessary
- Dangerous materials, chemicals, weaponry, and food and drink items typically require a specific license for export to Europe. Make sure to check with your target country and their laws in order to make sure your merchandise doesn’t get stopped at the border.
- Forgetting to adjust your packaging to meet European laws
- There are certain norms in packaging for European markets that need to be followed in order to sell products in Europe. Failing to conform to these packaging norms can have serious consequences for your business overseas.
Going with an E-Fulfillment company already installed in Europe gives you an advantage: you already have someone who is used to doing business in Europe to walk you through each of the steps. Doing business internationally is complicated if you ignore the administrative parts, especially when it comes to taxes.
We will analyze your products or services together and help you choose what markets you want to export to first. We will be your on-site liaison for concerning marketing your product and getting your E-commerce site ready for your international customers. We will help you translate your prices into euros and we can also help you translate your site into the language of your target country. We will also provide customer and returns services in the native language of your customers, which helps build trust in your brand and promote loyalty.
We will also help you stay in compliance with European laws and regulations, from the marketing notices, to legal documentation, liability, and product compliance. European customers are wary of products that don’t meet European health and safety standards, so we’ll make sure that your products are as compliant as possible in order to compete effectively. If your product requires an export license, we’ll do all the necessary administrative tasks in order to get it.
Additionally, we will handle your foreign logistics. Our location and secured warehouses are ideal for export as we’re situated between Paris, capital of France with access to major international airports, and Le Havre, which is a major export shipping port in Europe. If you choose that your suppliers deliver directly to us, we will optimize your supply chain logistics in order to keep your business running smoothly. Our interface will allow your customers to choose their preferred delivery method and carrier to receive their products at convenience.
There’s a lot more to consider when exporting internationally to Europe, but this is a good launching point. Choosing Mister Logistics for your international E-fulfillment solutions makes the difference between the risk of missing something important, and having a business partner dedicated to helping you succeed in this venture. For more information, feel free to contact us and we’ll work together to get your business started in Europe.