If you’re an Etsy seller and have buyers from the EU, VAT collection now looks different, after the EU VAT reform (effective from July 1, 2021). In this article, we’ll look at the things you need to consider and to do, based on where you’re located, and on your sales.
Etsy sellers who are located in the EU (EU sellers)
If you’re in the EU and you’re selling to customers from other EU countries, i.e. if you have cross-border B2C transactions within the EU, you need to charge VAT on your sales.
There are two scenarios you need to consider:
1. Annual sales under €10,000
If your annual sales are under €10,000, you need to charge domestic VAT, i.e. apply the VAT rate of the EU country where you’re established, and from which you’re dispatching the goods. You need to declare and pay VAT via a regular VAT return, which you file at your local tax office.
2. Annual sales over €10,000
If your annual sales are over €10,000, you need to charge foreign VAT, i.e. apply the VAT rate of the destination country for each sale that you’re making within the EU. You’ll have the option to register for the OSS (One-Stop-Shop) scheme, which will allow you to file a single digital VAT return each quarter, for all of your cross-border EU sales. For your domestic sales, you still need to charge domestic VAT and remit it to your local tax office.
If your annual sales are over €10,000 but you choose not to register for the OSS system, you’d need to register for VAT in each EU country where you exceed the VAT threshold.
How do you register for OSS?
To register for OSS, you need to check your local tax office’s website and find the OSS registration page, where you should follow the OSS registration instructions.
After that, you need to update your Etsy profile with the OSS VAT ID your local tax office gives you. For this, log in to Etsy.com, go to Finances > VAT ID and enter your One-Stop-Shop VAT ID.
Please note that if your inventory is stored outside of the EU, the next section applies to you.
Sellers with inventory outside of the EU at the time of sale (non-EU Etsy sellers)
Again, there are two possible scenarios:
For imported goods of a value of €150 or less
If you’re selling goods stored outside of the EU at the time of sale, and that will be imported into the EU, Etsy will collect and pay VAT for parcels of a value under €150.
This will be done automatically, as Etsy is considered the deemed supplier.
Etsy will apply the VAT rate of the buyer’s country (i.e. the destination country). Each EU country has its own VAT rate, which typically varies from 17% to 25%. The buyer will pay VAT at checkout, and then it’s Etsy’s responsibility to remit it. As a seller, you don’t have to charge VAT on those sales, to avoid double taxation.
For imported goods of a value over €150
If the value of the parcel imported to the EU is over €150, standard import procedures apply, and VAT and import duties are due.
Please note that what’s taken into consideration is the total value of the parcel, not the value of each item or of the order. For example, if you’re selling 2 items to the same buyer, of €100 and €60, if you ship them together, standard import fees and VAT apply. If you ship them separately, Etsy is responsible for VAT. You might need to check with Etsy how this will function in practice on orders of over €150.