When to charge VAT?

If you have a CloudCart store and you are selling your products in the EU or other regions outside the Union, you should understand when to charge VAT on your sales and which rate to apply to each customer. 


If your annual turnovers are below a certain threshold, you do not have to register for VAT. In that case, you do not charge VAT on your sales regardless of where your customers come from, and you can skip the steps below. If your business is VAT registered, you have to charge VAT to some of your customers and include your VAT number in your invoices.

Important! After the change in VAT rules as of July 1, 2021, the existing thresholds for distance sales of goods within the EU have been abolished and replaced with a new threshold for the entire EU of EUR 10,000. Below this threshold of EUR 10,000, distance sales of goods within the EU may continue to be subject to VAT in the member state where the taxable person is established. Read more here.

 

Whether or not to charge VAT on a specific sale depends on which country your customer comes in and whether it is a consumer or a business.

Understanding VAT taxes

1. Selling in your own country


When you are selling in your own country, you are required to charge VAT if your company is VAT registered. 

  • If the customer is from your own country, no matter if it is a company (B2B) or an end-user, the VAT is always applicable.


2. Selling in another country of the European Union


If you are selling to a different country within the EU, you have to distinguish between consumers and businesses.

  • If you sell a product to a company (B2B) registered for VAT in the EU, which operates in another country of the Union, you do not charge VAT on this sale. This company has to pay VAT in its own country on the applicable rate for that state. 

  • If you sell the same product to an EU end-user, you have to charge VAT on this sale at the rate applicable in your own country, or you may have to charge VAT at the rate applicable in their country if you have exceeded the EUR 10 000 distance selling threshold.

List of all EU states working with VAT

        'AT', // Austria
        'BE', // Belgium
        'BG', // Bulgaria
        'HR', // Croatina
        'CY', // Cyprus
        'CZ', // Czech Republic
        'DK', // Denmark
        'EE', // Estonia
        'FI', // Finland
        'FR', // France
        'DE', // Germany
        'GB', // Great Britain
        'GR', // Greece
        'HU', // Hungary
        'IE', // Ireland
        'IT', // Italy
        'LV', // Latvia
        'LT', // Lithuania
        'LU', // Luxembourg
        'MT', // Malta
        'NL', // Netherlands
        'PL', // Poland
        'PT', // Portugal
        'RO', // Romania
        'SK', // Slovakia
        'SI', // Slovenia
        'ES', // Spain
        'SE', // Sweden



3. Selling outside the EU


If you sell your products to customers outside the EU, you do not charge VAT. However, you can deduct the VAT you paid on related expenses, such as goods or services purchased specifically to make these sales.


In some countries, there are differences in the VAT rates of certain product categories. Take a look at the article for the Tax overrides and Exemptions.