Why do you need an ecommerce accountant?

 In General

The Internet has made it easier than ever for small and medium sized businesses to join the global marketplace, reaching clients anywhere in the world.

If your business is VAT registered, you will already be familiar with the demanding paperwork involved in collecting, paying and reclaiming taxes – though within the UK, VAT is a fairly straightforward part of business life. But once you start selling to customers in the EU, the varying and sometimes complex rules require more time and resources to administer VAT correctly – this article gives a quick overview of why these rules are so complicated, and why your expanding business should consider a professional ecommerce accountant’s help.

EU ecommerce under EU regulations, not HMRC

Under the new distance selling regulations that came into effect on January 1st 2015, any business selling goods or services to EU customers has to register for VAT in the country where the client is based. Similar to the UK, each country has a defined threshold below which registration is unnecessary, but if your business specialises in high value goods, it does not take too many sales before that mark is reached.

This means that if you sell enough of your product or services to your contacts in Paris and in Berlin, you will also need to register for VAT in France and Germany. And as your client base increases, the number of international VAT registrations will also escalate, requiring your business to understand the rules for each.

Different regulations for different EU states

Despite the Eurozone having a unified currency, each member state has its own sovereign taxation rights, leading to a broad spread of different VAT rates. At the lowest end of the scale, Luxembourg rates are set at just 17% and Russia 18%, while Hungary expects their citizens to pay 27%, with Sweden and Norway at 25%. And every country expects you to keep track of and comply with the tax paid by their citizens.

This also raises the difficult decision of whether sliding scale product pricing is required to maintain business margins – can your business afford to take a hit on sales to Scandinavia, for example, to help keep lower rate markets happy?

Such complicated business market conditions make it essential to keep your records and registrations straight – no business could afford to have multiple revenue authorities seeking redress. And be aware that, just like the VAT rates themselves, each country has its own penalties – up to 120% levied on top of the outstanding sum.

What can an ecommerce accountant do for your business?

In order to understand and comply with all the complex international regulations, your business should consider a tailor-made ecommerce accountancy package. This includes not only a dedicated, specialist ecommerce accountant to explain both the UK and EU VAT rules on goods and services, and process your VAT returns, but also easy-to-use Xero software that fully integrates with your ecommerce payment solutions – whether your website uses Shopify, Paypal, Magento, Big Commerce, Unleashed, or others – making your record-keeping automated and simple. For more information on how our ecommerce accountants can help your business, contact 3 Wise Bears today.

 

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