It is very important to file tax declarations on schedule in Europe. But sometimes, sellers delete sales records in order to reduce tax reporting after registering their tax ID, resulting in long-term zero reporting.
Little did they know, such operations carry extremely high risks, including the risk of paying back taxes, high fines, and even store closures. So what is the correct way to declare VAT? How to solve the zero declaration problem in various countries?
1、 What is VAT declaration for?
Value added tax (VAT) refers to the tax collected by importers on behalf of tax authorities on the sale of goods, provision of services, or importation of goods from overseas into European countries, and also refers to the profit tax on the sale price of goods.
VAT is divided into import VAT and sales VAT. Import VAT is collected during import customs clearance procedures (deferred goods do not need to be collected) in order to be released for circulation. Sales VAT refers to the tax declared and paid based on the sales amount of goods after sale.
The seller declared the import VAT and sales VAT related to the tax number during a certain declaration period.
As the name suggests, when goods enter the European Union, the seller declares and pays import VAT; After the goods are sold, you can apply for a refund of the import VAT and then declare and pay the sales VAT based on the sales amount.
2、 Which cross-border sellers need to declare VAT?
From a compliance perspective, sellers with VAT accounts are required to regularly declare value-added tax. And different types of cross-border transactions will have different declaration items and declaration methods:
1) To B cross-border sellers can independently pay VAT. To B seller refers to selling goods directly to local distributor companies, not directly to end consumers. The items that can be declared and paid independently include taxes and fees related to import customs clearance and tax declaration after the completion of goods.
2) To C cross-border sellers, the platform will withhold and pay VAT on their behalf. But not all TO C orders are subject to value-added tax withholding and payment by Amazon.
To C sellers are divided into FBA sellers and FBM sellers (self shipping sellers). For FBM sellers who ship from outside the UK/EU and sell within their territory, regardless of the company's registered location, the platform will not withhold or pay VAT for orders with a value greater than £ 135 or € 150.
After VAT withholding and payment, tax declaration must still be made on schedule; VAT deferral also requires truthful tax declaration.
3、 Is it correct for cross-border sellers to declare VAT?
Zero declaration: Within the same declaration period, if the country to be declared has not generated sales, zero declaration can be selected.
Normal declaration: Within the same declaration period, if the country that needs to declare has sales business, the seller chooses to declare normally.
It should be noted that zero declaration and normal declaration with zero tax are not the same concept. After the seller chooses the platform for withholding and payment, they cannot choose zero declaration, but must upload the sales revenue normally.
The system will automatically calculate the seller's payable taxes (payable taxes=sales value-added tax - import value-added tax). If the seller has already paid in full, the system will recognize and display that your payment amount is 0.
4、 What are the risks of long-term VAT zero declaration?
According to the EU Value Added Tax Directive 2006/112/EC and Amazon's official announcement, the following penalties are imposed for illegal acts of unregistered, unreported, and unpaid VAT:
Unable to enjoy import value-added tax refund
Goods detained by customs and unable to clear customs
Amazon account cannot conduct any sales
Pay back taxes and interest, face huge fines
5、 What are the response measures for zero VAT declaration in various countries?
Different countries have strict requirements for zero declaration, what are the requirements for the number of zero declarations? What are the risks of zero declaration? Select a few countries for analysis below.
1. United Kingdom
UK sites generally have three zero declarations, or even 1-2 zero declarations, which may result in the risk of tax number cancellation. If an account has no sales records for a long time, the tax bureau will consider that the account has no actual operation and will cancel it. Stores related to this tax number will also affect sales and even affect normal customs clearance
If all declaration items are zero, the seller can choose zero declaration, but because there is a high probability that the tax bureau will directly cancel the tax number for three or more zero declarations, it is recommended not to make multiple zero declarations.
2. Germany
Long term zero declaration for German sites refers to three consecutive zero declarations by monthly report sellers, two consecutive zero declarations by quarterly report sellers, and zero declarations by annual report sellers. In this case, the tax bureau will also consider that the account is not actually operating in Germany and will automatically cancel the tax number.
Tax number cancellation caused by zero declaration can be reactivated by applying to the tax bureau. However, individuals are unable to activate their tax ID and need to designate an authorized person (i.e. a German tax accountant) who will liaise with the tax bureau. Whether the tax ID can be activated ultimately depends on whether the store is actually operating.
The actual taxable sales amount is indeed zero (no sales at all), and all other declared items (such as cross-border B2B transactions within the European Union) are zero, indicating that the company has no actual operations in Germany.
From a compliance perspective, tax identification numbers will naturally be cancelled. If the actual sales amount is zero and other declared items have data, it does not belong to zero declaration. The seller can declare truthfully and normally.
3. France
The VAT declaration in France is similar to that in Germany, but the difference is that France has stricter tax agency regulations and assumes joint liability in case of problems. Therefore, sellers need to declare and pay taxes in a timely manner.
VAT declaration must comply with local tax laws and be completed within the deadline set by the French tax authorities, and taxes must be paid on time. Failure to do so will result in late fees and penalties.
If there is a long-term zero declaration, it will trigger a warning from the French tax authorities, leading to tax verification. If it is not cancelled and not declared, it will be listed as a blacklist, and related personnel will not be able to re register French VAT numbers in France.
4. Spain
Zero declaration of B2B business in Spain usually triggers risks if it occurs 2-3 or more times in a row. B2B business in Spain does not require any declaration action when it is zero, that is, no declaration is required. For B2B transactions that have already occurred but have not been declared on time for more than 2 quarters, the tax bureau is likely to cancel the EU tax number, issue a letter requesting an explanation for the reasons for non declaration, and require the seller to make up for the declaration, pay fines and late fees.
Local tax number cancelled: You can apply for activation, but it may also be rejected by the tax bureau because the same company name cannot be re registered with a new tax number.
5. Poland
According to the regulations of the Polish tax bureau, if the seller declares zero at the Polish station for 2 quarters/6 months, the tax bureau has the right to cancel the tax number and request the reasons and supporting documents for the long-term zero declaration. If the provided proof documents cannot pass the review, the seller's tax ID will be forcibly cancelled. Failure to reply to the tax bureau and provide proof will result in a severe fine of 3000 zlotys.
Which sellers are eligible for 0 declaration? The products are not suitable for sellers who sell to or ship from Poland. But any form of zero declaration will receive a letter from the tax bureau, regardless of whether it is true or not.
In countries such as Austria, the Netherlands, the Czech Republic, Saudi Arabia, and the United Arab Emirates, there are generally four or more consecutive zero declarations, and the tax number will be cancelled and the store will be banned from sale. Whether it can be successfully activated or re registered depends on the final processing result of the tax bureau.
Long term zero declaration and failure to declare on time will result in strict restrictive measures taken by tax bureaus and platforms, such as directly canceling tax numbers, banning sales, and collecting fines and late fees. Sellers must declare according to requirements and follow the path of compliance.
In short, the tax regulations in the cross-border e-commerce industry in Europe are quite complex. Sellers should be cautious and make long-term zero declarations, adjust their declarations and transaction records in a timely manner, ensure their legal operation in the European market, and achieve long-term stable development.