Accounting for VAT

The distance selling rules only apply to sales you make to customers who are not VAT registered. They apply to any type of sale, however, so include sales via your website, by phone, or by mail order.

When it comes to your VAT rules, the distance selling rules set out where you have to account for VAT, i.e. here in Ireland or the country your customer comes from.

You have to account for VAT in Ireland so long as your total sales to customers in a particular EU country do not exceed the limit that has been set for that country. If your total sales over a year do exceed the limit for that country, you have to register and account for VAT there.

The limit for each country in the EU is different, but most have the same limit for distance selling as Ireland – €35,000. This includes France, Spain, and Portugal. Countries not in the Euro have thresholds set in their own currency (for example, Denmark’s is 280,000 kroner), while other countries have set higher thresholds. This applies to countries like Germany (€100,000) and the Netherlands (€100,000). The UK’s threshold is GBP £70,000.

You can find a full list of thresholds that apply to EU countries on the European Union’s website.

Here are some examples of how the distance selling rules might affect your business:

  • Your business sells to customers in Spain.  The total value of those sales is €20,000. This is less than the €35,000 a year limit that applies to Spain so you should pay VAT on those sales in Ireland.
  • Your sales in Spain increase to €45,000 a year, putting you over the limit. The VAT on those sales must, therefore, be paid in Spain so you must be registered for VAT there.

To find out how to register for VAT in an EU country, and to learn more about its VAT rules, you should visit that country’s national tax website.