Ecommerce & Digital
International Ecommerce: The VAT Problem Nobody Talks About
1 May 2025
International ecommerce strategies tend to focus on the exciting parts: new markets, new customers, revenue growth. The VAT implications get a paragraph in the full cost of international ecommerce. if that. By the time they become a problem, the business is already committed.
VAT compliance in cross-border ecommerce is complex, jurisdiction-specific, and genuinely consequential if you get it wrong. It is also entirely manageable if you plan for it properly. Most businesses do not plan for it at all.
Why it is more complex than it looks
Selling domestically, VAT is relatively straightforward. You charge it, you account for it, you file your return. Cross-border changes almost everything.
The fundamental question is where VAT is due. The answer depends on what you are selling, to whom, in what volumes, through which channels, and where the goods are physically located at the point of sale. Those variables interact in ways that produce different obligations in different markets, and the rules have been changing.
The EU’s OSS (One Stop Shop) scheme simplified some of this for B2C sales within the EU. Pan-European fulfilment through Amazon’s FBA programme creates its own obligations, because goods stored in a warehouse in Germany create a VAT registration requirement in Germany, regardless of where the seller is based.
The Amazon FBA problem specifically
Amazon’s Pan-EU FBA programme is commercially attractive. One inventory pool, pan-European distribution, fast delivery times. The commercial logic is straightforward.
The VAT logic is less so. When Amazon moves your stock from one fulfilment centre to another across EU borders, that movement is a taxable event in some jurisdictions. You may be required to register for VAT in every country where Amazon stores your goods, not just the countries where you sell to customers.
This is not a loophole or an edge case. It is the straightforward application of EU VAT rules to a specific fulfilment model. Businesses that do not understand it when they enrol in Pan-EU FBA can find themselves with historic filing obligations across multiple EU jurisdictions before they realise the requirement existed.
Distance selling thresholds
Before OSS simplified the picture, EU distance selling thresholds determined when a seller had to register in the destination country. Those thresholds were removed in 2021 and replaced with a single EU-wide threshold of €10,000. Above that, OSS registration handles the obligation across EU member states from a single filing.
Below €10,000, the seller’s domestic rules apply. For most businesses that are genuinely trying to scale internationally, the threshold is crossed quickly.
What to do about it
The starting point is a VAT position review before you scale, not after. Understand where your registration obligations exist and where they will exist as volumes grow. Understand how your fulfilment model affects those obligations, particularly if you are using marketplace fulfilment services.
There are specialist VAT compliance providers who handle cross-border ecommerce obligations efficiently and at reasonable cost. This is an area where specialist advice is worth the fee. The cost of getting it wrong, in penalties, back-filing, and management time, is significantly higher.
Build the compliance cost into your international expansion model from the start, alongside international pricing and other cross-border tax considerations. It belongs in the business case alongside the certification costs, the marketing budget, and the distributor fees.
Maebh Collins is a Chartered Accountant (FCA, ICAEW) with twenty years of operational experience as a founder and senior finance leader, including international ecommerce across multiple EU markets.
Maebh Collins is a Chartered Accountant (FCA, ICAEW), Big 4 trained, with twenty years of experience building and running international businesses. She specialises in finance transformation, ecommerce operations, and digital strategy.