INSIGHTS
Navigating Value-Added Tax Implications for E-Commerce Businesses
by RSM US LLP
ARTICLE | March 18, 2025
The global e-commerce market has experienced exponential growth, with sales projected to exceed $6.5 trillion in 2025. In response, tax authorities all over the world have been adopting rules to ensure they continue to collect tax on the economic activities within their geographical boundaries. For U.S. businesses entering international markets via e-commerce, it is crucial to understand and comply with local value-added tax (VAT) and goods and services tax (GST) rules to avoid financial and legal issues. Since VAT rates, registration thresholds and compliance requirements vary across countries, businesses must be diligent when expanding abroad and fully understand the VAT implications.
Key VAT considerations
Distribution channels: Will products be sold through the business's website, through e-commerce platforms and online marketplaces, or through a combination of those channels?
Identification of customers: Will products be marketed and sold to private individuals only (B2C) or to businesses (B2B) as well?
Supply chain management: How will international shipments be managed? Is the business planning to hold inventory overseas?
Avoiding unexpected tax costs: Are measures being taken to optimize the customer experience and to ensure overseas customers are not receiving unexpected tax charges at the time of product delivery?
Registration and compliance: Are potential VAT registration and compliance obligations considered before entering new markets to avoid regulatory surprises?
Cross-border transactions: Are measures being taken to comply with VAT on cross-border transactions, including collecting and validating vendor and customer information, applying the correct VAT rates, and issuing compliant invoices?
Involvement of third parties: Are the roles and responsibilities of third parties, such as logistics providers, well-defined and agreed upon, including the VAT compliance for cross-border shipments, warehousing and other relevant activities and transactions?
Tax technology and automation: Will technology be used to automate VAT compliance processes, streamline VAT reporting and improve the accuracy of tax calculations?
Global VAT measures and compliance
Tax authorities worldwide have implemented measures to enhance tax collection, simplify compliance and foster fair competition. For example, the Import One Stop Shop and One Stop Shop regimes simplify VAT compliance for businesses engaging in e-commerce activity into and within the European Union. Businesses can meet their VAT obligations in 27 EU member states with a single registration, reducing time, cost and complexity for e-commerce within the EU.
Various VAT jurisdictions, including the EU, the UK, Singapore, Australia and New Zealand, require nonresident e-commerce businesses to register and account for local VAT/GST on the supply of low-value goods at the point of sale rather than at the customs border upon import. These measures expedite customs clearance and improve delivery times, enhancing the customer experience. Thresholds and requirements for low-value goods vary by jurisdiction and should be assessed individually.
Determining how these regulations may affect businesses will depend on various factors that must be well understood and carefully analyzed on a case-by-case basis.
Consult your indirect-tax professional for more on this topic.
VAT success story
Business challenge
A company in the process of expanding through multiple e-commerce channels (website, Amazon, Shopify) faced significant VAT compliance issues affecting growth and adherence to local tax laws.
The solution
RSM worked closely with the company’s international expansion team to establish their VAT footprint and streamline their VAT compliance processes in a way that fit the needs and capabilities of the business. The end-to-end support helped foster the company’s international expansion while enhancing their operational efficiency and compliance.
RESULTS
Streamlined VAT compliance
Implemented consistent VAT practices across various jurisdictions, improving VAT reporting, collection, invoicing and accounting
Enhanced operational efficiency
Reduced administrative burdens, allowing the client team to focus on more critical business matters
Successful international expansion
Entered major markets like the EU, the UK, Australia and Canada, boosting growth and recognition
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This article was written by Kaatje Street and originally appeared on 2025-03-18. Reprinted with permission from RSM US LLP.
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The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.