Tax regulations for overseas e-commerce sales
Learn about the tax laws applied in foreign countries so you can sell with your e-commerce without worries even abroad
If your e-commerce business operates in other countries, tax laws for foreign sales may vary and it is important to know what to do to process invoices properly. After your customer makes payment, the execution of the purchase order follows, which is distinguished into:
- Direct electronic commerce: electronic supply of virtual goods or services. For VAT reporting purposes, such transactions are supplies of services;
- Indirect electronic commerce: physical supply of tangible goods, for which a contract is concluded and payment is made. For VAT return purposes, such transactions qualify as supply of goods;
B2B e-commerce
In B2B sale, the transaction is not relevant for VAT in the Italian territory, so the invoices are not taxable for VAT purposes (according to Art. 41 in case of supply of goods, the supply of services is out of the VAT field). The taxation regime followed is that of the state of the purchaser (the one who buys) and VAT is applied by self-invoice. The buyer will pay the VAT in his own country by issuing and supplementing the invoice received according to the “reverse-charge” technique (the supplier issues an invoice with only the taxable amount, expressly stating this on the invoice).
For VAT returns in Italy:
send monthly lists: if the supplies of goods and/or services rendered are equal to or greater than 50,000 euros in the reference quarter and/or in one of the previous 4 quarters;
send quarterly lists: if the supplies of goods and/or services rendered are under 50,000 euros.
B2C e-commerce
In B2C e-commerce, sales abroad are subject to the VAT of the buyer’s country of residence if the turnover thresholds on an annual basis, set by the various EU countries, are exceeded. In contrast, an indirect B2C e-commerce within the European Community is invoiced with Italian VAT, only if the amount of sales in the country is “sub-threshold” (currently only €10,000 in most countries).
Otherwise, membership in the OSS system is mandatory, with VAT being charged in the recipient country and paid in the home state through the appropriate service of the Internal Revenue Service. In fact, the applicable VAT rate is that of the country in which the sales activities are carried out, which is to be maintained, however, only until the thresholds set by the European Community are reached.
B2B e-commerce
In the case of non-EU B2B online sales, an invoice without VAT is issued together with the export bill, so you have to submit the export declaration to the departure customs and get the visa from the arrival customs.
B2C e-commerce
For B2C sales to non-EU countries, a regular tax invoice is issued, exempt from VAT Ex Art.8. Goods shipped to customs will be subject to VAT and duties of the destination country (charged to the end-consumer customer).
In the case of the return of goods by the foreign customer to the Italian company, the company that sold through e-commerce must take care of the export from the foreign country (then the return to Italy), declaring the goods for final import, or adopting the solution of duty-free return:
- issue credit note to reverse (total or partial) the invoice previously issued;
- manage the return in general accounting (and stock accounting), while still adjusting the amount of the plafond downward for the next tax period.