VAT on distance sales: what startups and scale-ups need to know when selling across borders

What exactly are distance sales?

Distance sales involve cross-border deliveries of goods to customers in other EU member states who act as final consumers under VAT. Think primarily of private individuals, but the scheme may also be relevant for other customers without the right to deduct input tax.

The essence is simple: if goods are transported or shipped by or on behalf of the supplier to a customer in another Member State, the delivery is in principle considered to take place in the Member State where the transport ends. In other words, it is not the state of departure but the arrival state of the goods that will then be decisive for the levying of VAT.

For startups and scale-ups, this is an important difference. A Dutch webshop that delivers orders to consumers in Belgium, Germany or France therefore does not automatically have to deal with Dutch VAT alone. As soon as the distance sales scheme applies, VAT is levied in the customer's country.

That's exactly why this topic has so much impact on e-commerce, SaaS companies with hardware components, D2C brands, and platform companies. The commercial step to multiple EU countries is often technically quick, but the VAT administration changes immediately.

Why does this scheme exist?

Without a special regime, cross-border deliveries to consumers would in many cases remain taxed in the Member State where the sale departs. That could make it attractive to sell goods from countries with lower VAT rates. The regulation for distance sales is precisely intended to limit that effect.

That is why the VAT charge for these transactions is transferred to the Member State of arrival. This is more in line with the place where consumption takes place. For entrepreneurs, this mainly means that the VAT rate and declaration obligations no longer always follow from the seller's place of business, but from the consumer's country of residence.

This is relevant for young tech companies because international sales often start earlier than the internal finance and tax processes can handle. A scalable sales model without a scalable VAT structure will sooner or later cause friction.

When is there an intra-community distance sale?

Not every cross-border delivery to a consumer is automatically a distance sale. In any case, a few important conditions must be met in order to apply the scheme.

First of all, the goods must be shipped or transported from an EU member state other than the one where the transport ends. In addition, it must be delivered to a customer who is considered an end user in this context. In practice, it is often about consumers.

At least as important is the supplier's role in transport. The arrangement only applies if the shipment or transport takes place by or at the expense of the supplier. In addition, the supplier does not necessarily have to carry out the transport completely himself. Indirect intervention may also be sufficient.

When does the supplier play a role in transport?

This is where things often go wrong in practice. Many entrepreneurs think that there is no distance sale as soon as a third party carries out the logistics. That is not necessarily true.

The scheme can also apply if the supplier outsources the transport, is responsible for delivery, invoices transport costs or actively forwards the customer to a carrier. Promoting a third party's delivery service or sharing the data necessary for delivery may also be relevant.

It is different when the customer really organises the transport himself and the supplier does not play a role either directly or indirectly. In that case, the required involvement of the supplier is missing and the normal place of delivery system remains leading.

For startups, this is an important focus in the operation. The tax outcome depends not only on what the terms and conditions say, but also on how checkout, fulfillment, shipping options and customer communication are actually set up. A product team, operations team and finance team must therefore connect here.

The €10,000 threshold: small amount, major consequences

An important exception applies to entrepreneurs who are only established in one Member State. As long as the total cross-border turnover from distance sales of goods and certain digital services to non-taxable persons outside the home Member State remains below the annual threshold of €10,000 excluding VAT, VAT will in principle remain due in the home Member State.

That sounds friendly, but in practice, this threshold is low. For many growing web shops, this limit has been reached quickly, especially when, in addition to goods, digital services are also provided to consumers in other Member States. As soon as the threshold is exceeded, the VAT levy will in principle shift to the consumer's Member State.

At Startup-Recht, we see that founders often underestimate this limit. Especially in the early scale-up phase, a few successful campaigns abroad can be enough to move from a simple Dutch VAT position to multiple foreign VAT positions.

That is why it is wise not only to monitor this threshold afterwards in accounting, but also to include it in dashboards, pricing models and expansion plans beforehand. Anyone who only discovers after being exceeded that VAT actually belongs in other Member States is immediately running into repair work.

The Union scheme: not a panacea, but a practical route

If VAT becomes chargeable in multiple EU member states, this does not automatically mean that an entrepreneur has to register for VAT separately in each of those countries. For intra-Community distance sales, the one-stop shop system, the so-called Union scheme, can be used.

This scheme makes it possible to declare and pay VAT for other Member States in your own Member State. The amounts due are then forwarded to the Member States concerned.

For startups and scale-ups, this is often an administrative advantage. Especially in the case of rapid international growth, you would rather not immediately set up a separate registration and declaration process in each new sales country. At the same time, it remains important to realize that the Union scheme does not remove the substantive VAT obligations. The entrepreneur still has to determine in which Member State VAT is due and what rate applies there.

The Union scheme therefore primarily simplifies payment, not analysis. This distinction is important, because otherwise entrepreneurs will think too quickly that OSS will solve the entire VAT issue.

Distance sales from outside the EU: note the import regulations

If you sell goods from a third country to consumers in the EU, an extra layer comes into play. In that case, not only the delivery to the consumer should be considered, but also the import of the goods.

For distance sales from outside the Union, there is a special import regime, also known as i-OSS. This scheme is intended for packages with an intrinsic value of no more than €150. Under this scheme, VAT can be reported and paid in one Member State, while the delivery is taxed in the Member State where the goods arrive to the consumer.

An important practical effect is that, when applying the import regime, a VAT exemption can apply to imports, so that double taxation is avoided. This makes the scheme particularly relevant for companies that deliver directly from a third country to EU consumers.

For tech companies with cross-border fulfillment, drop shipping structures or suppliers outside the EU, this is not a niche topic. The choice of how goods are shipped, where they are imported and whether the import regime is used can directly determine where VAT is paid and how complex the chain becomes administrative.

If the import regime is not applied, for example because the intrinsic value exceeds €150, different rules apply to the place of delivery and the import levy. That also requires a good layout beforehand.

Platforms and marketplaces: sometimes you are suddenly a supplier yourself before VAT

For platform companies, this is perhaps the most underrated part of the scheme. In certain situations, an electronic interface, such as a marketplace, platform, portal or similar tool, is deemed to have received and delivered the goods itself for VAT purposes.

This fiction applies in two specific situations.

First, for distance sales from outside the EU in shipments with an intrinsic value of no more than €150, regardless of whether the underlying supplier is located inside or outside the EU.

Secondly, for goods deliveries within the EU to private individuals when the underlying supplier is not located in the EU. In that situation, the value of the goods is not decisive.

The consequence is huge. The platform then becomes the party that has to pay for VAT, even if it does not act as a seller under civil law. This is a fundamental point for marketplaces, embedded commerce solutions and platform-driven retail models. The legal documentation, data flows, order flow and financial settlement must then be in line with a VAT position that focuses on the platform itself.

When does a platform actually facilitate?

Not every online intermediary automatically falls under this platform fiction. The decisive factor is whether the electronic interface facilitates sales.

In any case, this is not the case if the entrepreneur cumulatively does not determine general terms and conditions for delivery, is not involved in billing or payment and is also not involved in ordering or delivery. This also does not automatically include those who limit themselves to only payment processing, advertising alone or simply redirecting customers to other interfaces without further intervention.

For many tech companies, this is a useful but also dangerous nuance. In practice, the line between a purely technical platform and a facilitative interface is thin. A product feature that seems commercially logical can make the difference between staying out of the picture and becoming subject to VAT as a fictitious supplier.

Platform liability: data governance becomes tax governance

A platform that falls under this fiction often depends on information from underlying suppliers or third parties for the correct VAT collection. The scheme limits liability in certain cases, but only if strict conditions are met.

In short, the information provided must be incorrect and the platform must be able to show that it did not know and could not reasonably know that that information was incorrect. The burden of proof therefore lies with the platform.

This also makes VAT compliance an issue of data governance for platform companies. What information do you request? How do you validate it? What signs indicate that a supplier is nevertheless located within the EU, or that a customer is not a consumer but an entrepreneur? These are no longer purely fiscal questions, but also product, operations and compliance questions.

Which transactions are not covered by the scheme?

The regulation for distance sales is broad, but not unlimited. It does not apply to new modes of transport. It also includes used goods, works of art, collectors' items and antiques sold by a reseller under the margin scheme.

In addition, the regulation does not apply to goods that are assembled or installed by or on behalf of the supplier. This is particularly relevant for companies that offer installation in addition to e-commerce, for example hardware, smart devices or technical business solutions.

This is an important point for founders and legal teams: sales channels sometimes look alike, but do not always fall under the same tax regime. A webshop that ships standard products is in a different analysis than a company that has products installed on location.

And what about the KOR?

Since 1 January 2025, an entrepreneur based in the Netherlands can apply the small business scheme in another Member State under certain conditions. As a result, taxation on distance sales, among other things, can be omitted, provided that the conditions are met and the annual turnover in the Union does not exceed €100,000 in the previous calendar year or during the calendar year.

This can be interesting for startups with limited EU turnover, but only within the limits of that scheme. It is therefore not a general escape for international e-commerce, but it is a relevant development for smaller players who are just starting to sell cross-border.

What do startups and scale-ups need to do with this in concrete terms?

For startups and scale-ups, VAT, distance sales ultimately involves three questions.

One: who is your customer for VAT purposes?
Two: who actually organises transport?
Three: from which country do the goods depart and where do they arrive?

Add a platform layer, a foreign supplier, or imports from outside the EU, and the complexity increases rapidly. The VAT outcome then depends not only on the legal structure, but also on checkout design, fulfillment model, contracts, data quality and operational processes.

That is precisely why distance selling is not a topic that you should only tackle as soon as the accountant's first foreign VAT question comes in. For many tech companies, this belongs in the basic architecture of international growth.

Conclusion

VAT for distance sales quickly becomes the core of a scalable trading model. If you sell goods to consumers in other EU countries, there is a good chance that the VAT is due not in your country of residence but in the customer's country.

The €10,000 threshold, the Union regulation, the import scheme and the platform fiction make the playing field clearer, but only if you know exactly how your sales and logistics chain works beforehand. For startups and scale-ups, the profit therefore lies not only in correct returns, but especially in an institution that supports international growth without tax surprises.

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