With more and more UK businesses now dealing with online customers in other EU member states it is clear that this brings in an extra step to the process when it comes to issues like working out VAT rates. This needn’t be a huge problem but it is something which online business owners need to be aware of and think about before getting involved in making sales in international markets.
In fact, the first issue some companies come across is that they make the mistake of pricing their goods the same in every market across the continent, only to realise that it doesn’t make good business sense for them to do this. For example, in the UK baby products attract a 0% rate for VAT but this isn’t the same all across the European Union. This means that charging the UK price in a country where VAT has to be paid on it can eat into the profits or even make them disappear completely.
Different Options to Choose From
There are a couple of different options facing a business in this situation. One is to simply withdraw from the market on the basis that they can’t be competitive thanks to the local VAT rate. Another is to charge different prices in every country that trade in, which can lead to a hugely complicated pricing structure in some cases. There is no single best solution to this issue and it is just a question of each business finding the best way forward for their products and prices, often with the help of VAT consultants.
Another issue to be considered when it comes to dealing with international markets is that clients from different countries are used to different VAT methods being applied to the final price they pay. While in the UK the price quoted is almost always inclusive of VAT, in some other places the VAT is added onto the total which is originally given. It can be confusing and off putting for someone to come across a different method of showing the VAT element of the price than the one they are used to.
There is no doubt that the ecommerce system has opened up huge new markets for keen and resourceful entrepreneurs. The issue of different EU VAT rates isn’t a reason to give up on this idea, especially if you turn to experts like those at Accordance for guidance and help. In fact, in some cases the different rates can work out to the firm’s advantage overall. For example, if you set your pricing to reflect UK VAT levels then you can enjoy bigger profits in countries where the rate is lower. Some businesses charge the same price everywhere in the belief that the lower profits in some places will be offset by higher profits in others. The most important point of all is to think about this issue and come to an informed decision before going ahead and dealing with foreign markets.