Distance selling

What it means

Distance selling is a supply of goods to a non-taxable person in another EU country where the seller arranges transport. Typically an online shop sending parcels to customers in Austria or Germany.

Up to the EU-wide EUR 10,000 a year the tax stays at home. Above it the place of supply moves to the customer’s country and the tax belongs there.

If the customer is VAT-registered in another state, it is not a distance sale but an intra-Community supply exempt from VAT. A sale where the customer collects the goods is not a distance sale either, and parcels imported from third countries follow their own regime through IOSS.

How it works in practice

The simplest route is OSS registration: one quarterly return covers every country and saves registering in each. Invoices, however, must carry the customer country’s rate.

The threshold is shared between goods and digital services and counts across all countries together, not one by one. Even a small shop crosses it sooner than expected.

Before the first sale abroad we set up the client’s invoicing so that it picks the correct VAT rate for the country of delivery on its own. Rates change during the year in individual states, and the reduced rate there may apply to different goods than in Slovakia.

What to watch out for

Companies check the threshold after the year ends. But the change applies from the very supply that breached it: home rate before, customer-country rate after, and fixing it retrospectively is expensive.

Goods subject to excise duty, such as wine or tobacco, fall outside OSS. When they are shipped to private buyers in another state, both excise and VAT are dealt with directly in the customer’s country, and an online shop that overlooks this pays both taxes abroad.