Internationalization in eCommerce offers enormous growth opportunities with moderate effort and costs. One example is the Amazon PAN-EU program. However, companies are faced with bureaucratic challenges that they need to deal with beforehand. Especially in the area of VAT, there are points that need to be considered in order to be able to scale internationally without any problems. In this article, we – countX – present five key steps that are relevant in this regard.
1. market analysis and objectives
Before you expand into new markets, a thorough market analysis is essential. Identify potential target markets based on factors such as demand, competition and legal framework conditions. In certain product groups, there are country-specific restrictions that you should research beforehand.
Excursus: Amazon FBA
Internationalization can be initiated at the touch of a button via the Amazon FBA program. Costs, possible savings and growth potential can be calculated comparatively easily.
The fee table for shipping is publicly available on Amazon. For target customers in France, you will pay an average of €2 more per product for shipping from Germany compared to local storage in France. For a valid figure in relation to your individual SKUs, you can use the FBA calculator from countX. Based on your Amazon data, it analyzes in which countries it is worthwhile for you to store your products.
The calculation of growth depends on individual factors. However, an average of 30 percent per marketplace can be assumed. There are no upper limits.
2. take bureaucracy into account during internationalization
If you send products abroad as an online retailer, additional VAT obligations arise. However, eCommerce has become very complex in its logistics and decentralization and this complexity must be mapped correctly in terms of bureaucracy. This applies, for example, to direct shipping to end customers or storage in foreign fulfillment centers.
Various VAT processes must be taken into account, each of which depends on the physical movement of goods:
If you find yourself in the above scenarios or want to tackle them, you have additional VAT obligations. Logistics and responsibility for the movement of goods are key here. You should initially examine these in detail and, if necessary, have them checked by experts to see whether the tax setup matches what you are planning logistically.
3. consequences for invoicing
The internationalization of business creates new movements of goods, especially when using foreign fulfilment centers and adding additional marketplaces. It remains particularly important to clearly show in invoices how the goods were physically shipped and to correctly document the VAT situation.
Every cross-border transaction is considered an OSS transaction by definition. This means that even when shipping to countries where a VAT identification number (VAT ID) already exists, reports and invoices must be adjusted accordingly.
The same applies here: adapt the document creation to the physical movement of goods. Also make sure that both the accounting department and the VAT declarant have access to the data and can interpret it correctly.
4. consequences for German accounting
It is necessary to submit VAT returns not only in Germany and, if applicable, via the OSS procedure, but also in every country in which an active VAT ID exists. This has an impact on account management, data interpretation and integration. VAT is no longer split between one or two channels, but between two and seven. It is important to maintain control over data and processes.
If a tax advisor is not suitable due to a lack of experience in eCommerce, pre-systems can be used or data can be prepared and interpreted by service providers such as countX. In this way, the responsibility for validating, preparing and transferring the data can be partially transferred.
Important: If you change your logistics (especially in the case of internationalization), accounting processes and/or obligations often change as well. Understandably, these processes are often the last to be thought of. However, they form a fundamental basis and can later blow up in your face twice over.
5 Consequences for the OSS messages
There have been fundamental changes to the submission of the OSS procedure, particularly for international storage within the EU. Your products are now shipped across significantly more national borders in the EU. These are relevant border crossings that need to be monitored. Previously, there may only have been shipments from Germany to other EU countries, i.e. 1×26 borders. With the activation of the PAN-EU program, there are now generally 6×26 borders, i.e. 156 in total.
It is important to be able to distinguish between local and OSS transactions. These must be mapped correctly in the ERP system or invoicing program and interpreted correctly by the tax consultant.
Excursus: Errors in the international setup
So far, we have assumed that all VAT obligations are properly fulfilled and that there is an active VAT ID abroad. However, what happens with invoicing, accounting, OSS procedures and local reporting if, for example, there is no active VAT ID abroad – i.e. the setup is not set up as it should be?
What to do in the worst case?
Invoices cannot be issued correctly and do not match the physical movement of goods. Accordingly, the German accounting and the calculation of the German VAT report are incorrect, as is the OSS report. Not to mention missing reports abroad. Incorrect processes build up here which, depending on the time and down payment, can threaten livelihoods.
The following steps should now be carried out:
This should only serve as an example. The problem with VAT law is that there are no ongoing sanctions. This means that incorrect processes are carried out without the tax office registering them immediately. Sooner or later (at the latest during routine audits), however, these errors will be discovered and you will be obliged to clean them up retroactively.
Your all-round carefree package for VAT
As you can see, internationalization in eCommerce brings with it numerous VAT challenges, including registering for VAT in different countries, complying with reporting obligations and correctly accounting for tax. countX automates cross-border VAT for JTL customers. With intuitive software, strict quality checks and proactive personal contacts, we create what eCommerce needs in terms of VAT: transparency and security!
Find out more about how countX can help you manage VAT as part of your internationalization strategy and expand successfully. Book a free consultation with the experts at countX now.
