The tax implictions of selling abroad when using the internet
TIRED of Ireland's stagnant retail markets? Thinking of selling abroad over the internet? It's a good idea but before you get going you need to bear two things in mind: (a) the VAT rules, and (b) EU consumer protection laws.
If you are selling goods to consumers (not businesses) in other European Union member states, you should charge Irish VAT and include it in your Irish VAT returns.
However, if, in any calendar year, your sales to consumers in a particular member state exceed its "registration threshold", you must register for VAT in that state, apply its VAT rates and pay and file to its tax authorities.
For example, the registration thresholds in Germany and the UK are €100,000 and £70,000 respectively. Elsewhere, it can be as low as €35,000.
If you are selling services to consumers in other member states, the general rule is that you apply Irish VAT rates and account for VAT to the Revenue Commissioners.
In this context, "services" includes providing material for download. There are exceptions: services relating to buildings, artistic performances, transport, catering and car hire.
For online retailers, two pieces of EU consumer legislation are of particular relevance: the distance selling regulations and the sale of goods and associated guarantees directive.
Under the distance selling regulations, online retailers are obliged to provide consumers with the following details:
- Name and address of the retailer;
- Main characteristics of the goods or services;
- Price inclusive of all taxes;
- The period for which the goods / services may be bought at that price;
- Delivery charges;
- Arrangements for payment, delivery and performance;
- After sales services;
- The complaints procedure;
- The cooling off period.
If this information is not provided, the contract cannot be enforced against a consumer.
Consumers have a seven-day cooling off period to cancel the contract and demand a refund without giving a reason.
The period begins when goods are received or a contract for services is entered into.
If the information listed above is not provided to the consumer, the seven days may be extended by up to three months.
There are specific exceptions to the cooling off period including food, newspapers and software or music where a seal has been breached.
Online retailers are obliged to complete a contract within 30 days or offer the consumer a refund.
The sale of goods and associated guarantees directive was enacted by Brussels to introduce a consistent minimum standard of consumer protection across the EU.
It creates rights broadly similar to those under Ireland's Sale of Goods and Supply of Services Act 1980. Goods must match their description and must be fit for the purpose.
Goods must show the quality and performance which one would reasonably expect having regard to any claims made by the retailer.
Where goods are defective, a consumer is entitled to a repair or replacement free of charge and, failing this, a reduction in price or a refund.
Remember, this is a minimum standard, member states can introduce further consumer protections and you should familiarise yourself with the local laws of markets where you are selling.
Paul Brady is a barrister and an accountant and the founder of taxandlegal.ie