Business to Business (B2B) online sales & EU VAT: A Guide for Irish Business

In this part three of our four part guide to EU VAT and selling online we look at how you account for VAT when selling Business to Business (B2B) as opposed to Business to Customer (B2C) for both physical and digital goods. A transaction is considered B2B, for VAT purposes if both parties have an EU VAT number. See part one for selling physical goods online and VAT and part two for selling digital services and VAT.

Registering for VAT

When and why does an Irish business have to register for VAT? If you are an Irish based business selling goods or services then you must register for VAT if your turnover per calendar year is:

  • over €37,500 if supplyling services only
  • over €75,000 if supplying goods
  • over €75,000 if supplying goods and services where 90% of the turnover is goods (These goods do not have to include those made from zero rated materials)

The threshold for registration can be calculated by subtracting the amount of stock bought for resale from overall turnover for the year. Thus if a business sold €80,000 worth of taxable goods but bought them for €20,000 this would be only count as €60,000 for the purposes of VAT registration.

A business can also opt to register for VAT irrespective of it’s turnover. A foreign based business doing distance sales with a turnover in excess of €35,000 for goods sold in Ireland has to register for VAT in Ireland as well. There are also a number of particular instances where businesses will have to register for VAT covered here by the Revenue Commissioners. The Revenue requirements to actually register for VAT are here.

B2B sales within Ireland

Businesses making sales with VAT included either B2B or B2C must be account for them as sales when making their VAT returns.

Reverse Charge

The VAT on Intra-Community B2B sales (between EU member states) are subject to Reverse Charge as long as both the selling and purchasing businesses have valid VAT numbers. Reverse Charge puts the onus on the purchaser to record both the purchase and sale VAT on the item or service bought, thus both cancel each other out leaving no payment to be made. The VAT is charged at the rate of the buyer’s EU country. These type of returns can be recorded when filing a return and are the responsibility of the buyer. However, the VAT Invoice issued by the seller must clearly that it is a reverse charge VAT transaction. The main aim of this is to reduce the need for businesses to register for VAT in another EU state. Here is an example to illustrate the system from the Revenue Commissioners.

VAT Information Exchange System (VIES)

Reverse Charge can be catered for in online sales by adding a field on your e-commerce site (at the checkout stage) that facilitates the input of the VAT number by the business making the purchase. These numbers are automatically checked to ensure they are bona fide using the VIES system. It does not however check for the company name and address. Alternatively you can use the online VIES system through the EU portal.

Invoicing Obligations & Reverse Charge

On the suppliers’ invoice subject to Reverse Charge you must include: the purchasers’ VAT number, which you have checked via VIES and indicate that the invoice is implementing Reverse Charge.

B2B sales to customers outside of the EU

In general, you do not have to charge VAT for business customers outside of the EU.

WooCommerce VAT Solutions

All of these WooCommerce – Guilder Commerce’s preferred e-commerce platform – plugins will add a field for EU VAT at the checkout and check VIES to ensure valid VAT number are added by your customers:
EU VAT Compliance Assistant for WooCommerce
WooCommerce EU VAT Assistant
Yith WooCommerce EU VAT
WooCommerce PDF Invoices & Packing Slips

They also include solutions for B2C digital sales (MOSS), physical sales & invoicing which we’ll get on to in our fourth article on WooCommerce specific solutions to the myriad EU VAT issues.

If you have any queries, additional information to add, or indeed corrections on the above article, I’d love to hear from you hello@guildercommerce.com