Do you run a webshop and do you supply products to foreign consumers within the EU, generating annual turnover of EUR 10,000 or more? If so, specific laws and regulations apply. In this article, we bring you up to speed on the most important rules.

EU customers do not pay the Dutch VAT rate, instead they pay the rates applicable in their own countries

As a business, you are liable for VAT in the country where shipment ends. So, if you sell a product to a consumer from e.g. Germany, you will charge the consumer VAT rate applicable in Germany. If your turnover from foreign sales within the EU is less than EUR 10,000, you charge the Dutch VAT rate. Things are different for business orders from companies within the EU: in that case, no VAT is due. The same applies to all orders from countries outside the EU.

Do you charge a single fixed price or different prices per country?

Generating turnover of more than EUR 10,000 therefore means that you will charge and pay different VAT rates depending on which EU country your customer is based in

You can choose from two different price models:

A single equal retail price for all countries
A base price to which local VAT is added

As an advantage of the first model, your pricing policy will be the same throughout Europe, and therefore clear to consumers. The disadvantage is that the price excluding VAT will differ per country, depending on the VAT percentage applicable in the country in question. This means that your profit margin may vary per country and your bottom line might be affected.

When it comes to the second model, your pricing policy will be less transparent to consumers because your retail price will differ per country. The advantage here is that the price excluding VAT will be the same for all countries, so your bottom line will also remain consistent.

Examples of price models 1 and 2.

The same price for all countries

If you’ve chosen price model 1, your prices will already be correctly recorded in your Craft Commerce webshop, because all prices in Craft include VAT. In order to comply with the VAT rules, you’ll have to add VAT settings in your Craft environment for all the countries in which you sell your products and specify that VAT should be ‘reverse charged’. As a major advantage of this option, the same price including VAT will be displayed throughout your website. If your webshop automatically compiles invoices, go through the invoice settings and make sure that the right VAT rates are always specified. In theory, however, your webshop requires no further adjustments if you use price model 1.

Different prices per country

If you’ve chosen price model 2 and therefore intend to apply different retail prices to different countries, further adjustments will be necessary. That’s because all prices are currently reflected inclusive of VAT in Craft CMS. For this model to work properly, all prices will have to be converted to base prices. In this case, you’ll no longer charge a retail price. Instead, you will charge a price excluding VAT.

Take the following steps to prepare your website:

If you manage your prices in Craft, then adjust your prices to suit the new model via your CMS.
If your prices are managed by a checkout system connected to Craft, an adjustment to the connection will be required to ensure that the prices follow the new route to Craft.
Once all your prices are correctly adjusted, set the right VAT rate per country.
Add a country selection field, using e.g. an overlay or popup. Craft can only display the right prices if it knows what country the visitor is from.
If your webshop also generates automated invoices, check the invoice settings to make sure that the right VAT rates are specified

Commercial orders from abroad

Craft Commerce has a useful feature that facilitates the receipt of commercial orders from other EU countries. Although no VAT applies to these orders, you have to be sure that you’re dealing with an actual company. To do this, you’ll need your commercial customer’s valid VAT number. Craft CMS has been connected to the European VAT register, so the submission of a valid VAT number now gets verified for every commercial order. If a VAT number is valid, Craft Commerce makes sure that the purchase is completed with 0% VAT. This saves precious time and the effort required to make corrections at a later stage. This feature is available from Craft Commerce 3 (Pro version).

Make sure that you’re well-prepared

With this useful diagram, you can quickly check whether the VAT regulations apply to you and find out what steps you should take. If your turnover is currently less than EUR 10,000 but you expect it to rise above that figure, it would be wise to make the necessary arrangements in advance. When it comes to your Craft Commerce webshop, we can – when necessary – help you set it up correctly so that you’re well-prepared for the second half of the year in terms of VAT. However, make sure that your administration processes are ready for these imminent changes, perhaps in conjunction with your accountant. Important issues are invoicing and being aware of the rules on VAT returns.

VAT regulations for ecommerce within the EU