Value Added Tax Distance Selling Scheme
This situation has led to entrepreneurs in the retail sector rethinking their businesses in order to market their products through websites, making it possible to offer them to a greater number of consumers.
In order to prevent entrepreneurs or professionals from setting up in European Union countries where the taxation of Value Added Tax is lower, there is a harmonised regime for distance sales that applies to entrepreneurs who transfer goods to private individuals in another European Union member state.
This regime alters the rule of location of supplies of goods in the following cases:
1. Distance sales from other European Union member states to the Spanish territory where the tax applies These sales will be taxed in the territory of application of the tax (destination) when the following requirements are met
- The recipients of these deliveries are individuals, unidentified legal entities or unidentified entrepreneurs.
- The dispatch or transport of the goods is carried out by the seller or on his behalf.
- The goods which are the subject of these supplies are other than new means of transport, goods which are being installed or assembled, or goods which have been subject to the special arrangements for used goods in the State of origin.
- The total amount, excluding tax, of the supplies made by the entrepreneur or professional in the territory of application of the tax, has exceeded, during the previous calendar year, the amount of It shall also apply to supplies made when the limit has been exceeded during the current year.
However, distance sales made from other Member States are taxed in the Member State of origin when the amount does not exceed EUR 35,000.
Note that this is an optional regime and therefore the entrepreneur may choose to pay tax in Spain on all his transactions.
2. Distance sales from the territory of application of the tax to other Member States.
In this case, they will not be considered to have been made in the territory of application of the tax, and therefore will be taxed at destination, when the requirements of the previous section are met and the total amount of the same, excluding the tax, exceeds the limits set in that state for these purposes during the previous calendar year or during the current year.
Note that it is possible to opt for taxation at destination for all transactions, even if the limits set by each state have not been exceeded. This option will comprise at least two calendar years.
The aim of this scheme is to prevent entities engaged in distance sales from setting up in European Union countries where the VAT rates are lower. However, depending on the forecast and destination of the sales, it may be more beneficial to establish in certain European Union countries, so any alternative should be the subject of a detailed study.
It should be noted that these arrangements will be amended from 1 January 2021.