When international sales cross the tax threshold set by other countries you may be required to register, charge and pay tax in that country. This is common when selling into Europe or Australia (GST on imported low value goods). This is a guide to handling these additional tax liabilities in Brightpearl.
We recommend speaking with your accountant to ensure that you are conforming to all relevant tax rules.
Crossing the threshold
As soon as these thresholds are hit, then you are liable for tax in those countries. It is your responsibility to be aware of this and to pay the right tax to the right country following their rules. You will need to monitor the sales value made into each country manually. Brightpearl has no facility for automatically alerting you to any threshold in a particular country being crossed.
Brightpearl sales reports can be used to show total sales value and delivery country in order to calculate the total sales made to a particular country over a specified period of time.
Once you have forecast that sales into a particular country will cross the threshold and you have registered for tax, you will need to configure Brightpearl to apply the relevant tax codes to sales based into that country.
First of all, you should create tax codes for the relevant tax rates to be applied. These tax codes will also make it possible to view and report the tax payable to that country's tax authority. Learn more about tax codes here.
Brightpearl tax zones are used to create tax rules to automatically assign those tax codes to sales being delivered into a particular country. Learn more about tax zones here.
Tax regimes are used to control which tax codes are included in the VAT return. Learn more about tax regimes here.
A worked example
You're needing to report on sales into Germany separately from other EU sales.
- Create a new tax code for the German VAT rate (creating any tax components if necessary).
- Create a new tax zone called Germany, using the Germany tax code.
- Edit the Germany country to use this tax zone instead of the EU zone.
- Create a new tax regime for Germany, containing the Germany tax code.
New sales downloaded from online sales channels will have order lines set to the Germany tax code if the customer's delivery country is Germany (because the country Germany is in the Germany tax zone, and the tax zone has a tax code).
Your regular VAT return will no longer show amounts for the new Germany tax code (since it's not part of the VAT regime). You will be able to produce a new VAT return for just the transactions that contain the Germany tax code, using the Germany tax regime.
You will need to ensure that each of your sales channels, such as Amazon, eBay and your website, are configured to charge tax.
Import One-Stop Shop (IOSS)
From July 1st 2021, the EU has introduced changes to their distance selling rules which mean businesses can register with the IOSS, performing a single monthly VAT return, instead of having to register with each country individually.
EC Sales list
If you are required to produce a list of merchants and their tax numbers, with the sales made to those merchants, then you can use the EC Sales list (even if it's not for EC purposes).