Where a distance sale is taxed

A ceramicist in Valencia sells a €90 vase from her own web shop to a buyer in Lyon. The parcel crosses a border, the buyer is a private person, and the question sounds simple: Spanish VAT or French VAT? The answer turns on one EU-wide threshold of €10,000, and on where she is established.

What makes a sale a distance sale

The Commission's One Stop Shop portal defines the operation from the seller's side. Three elements must be present together, and missing any one of them takes the sale out of the regime described in this course.

• Goods dispatched or transported from one Member State to another
• Transport carried out by the supplier, or on the supplier's behalf
• A buyer who is a non-taxable person, or a person treated as non-taxable

Two kinds of goods fall outside the definition entirely: new means of transport, and goods supplied after assembly or installation. Goods subject to excise duties stay inside it, although Your Europe warns that excise goods and new means of transport follow special rules of their own.

The buyer's status changes everything. Your Europe states that goods sent to a business in another EU country are sold without VAT when that customer has a valid EU VAT number. Sold to a final consumer in the same country, the same product may carry VAT at the rate of the consumer's country.

One threshold for the whole Union

The general rule places a distance sale of goods where the transport ends. A threshold softens that rule for small sellers: while their cross-border sales to consumers stay under it, those sales remain taxed in the seller's own Member State, as domestic supplies.

For goods, the threshold does not stand alone. It adds together intra-Community distance sales of goods and cross-border telecommunications, broadcasting and electronic services supplied to consumers. The Commission is explicit that goods and services are not counted separately: only their combined total is compared with the threshold.

The portal lists three conditions for the threshold to apply, and every one of them must be met at the same time:

• The seller is established, or failing that has a permanent address or usually resides, in only one Member State
• The goods leave the Member State where the seller is established, bound for another Member State
• The total of these supplies stays within €10,000 excluding VAT, in the current calendar year and in the preceding one

The last condition looks both ways. A seller who went past the threshold last year does not start this year under it, however quiet January may be. And once the threshold is exceeded during the year, the portal leaves no room for doubt: the general rule applies without exception.

Some sellers are shut out by construction. A business established outside the EU that has one or more fixed establishments inside it cannot use the threshold, because the rule requires establishment in a single Member State and nowhere else.

Below the threshold, a seller may still prefer destination taxation, for instance to invoice every foreign customer in the same way. The choice is open to it, but the Commission's portal adds that the decision binds the seller for two calendar years.

Below or above: what changes for the seller

Each country applies this common rule through its own law and its own administration. The German calculator below runs the threshold test for a seller shipping from Germany; the Italian course shows the same provision from the side of a seller established in Italy.