Go and put the kettle on. Because you’ll need a strong coffee for this one… an article about international tax!

Joking aside, if you’re looking to expand globally, there’s a lot to figure out. We’ve put together a practical guide that cuts through the jargon and gives what you need to know. You can skim through to find what’s relevant to you. 

Here’s what we’ll cover:

1. International tax basics
2. Different tax types
3. Tax regulations for the US and Canada
4. Tax regulations for the UK and EU
5. Tax regulations for Australia
6. Tax regulations for China and India

Ready to dive into the world of international tax? Let’s do it.

Disclaimer: This guide has been created to offer a general overview of international tax regulations for online sellers across key global markets (the UK, US, EU, Canada, Australia, India and China). It is not intended to provide or be relied on for tax, legal, or accounting advice. We always recommend speaking with a qualified tax representative for specific advice about your individual tax requirements.      

What are the basics of international tax for ecommerce businesses? 

There’s no denying the facts. There’s nothing basic about international tax for ecommerce businesses. Tax regulations for online sellers are complicated. And to make that story even more tricky, tax regulations differ wildly depending on the geographic locations (or tax jurisdictions) you are selling to and from. 

What are tax jurisdictions? 

When we talk about tax jurisdictions, we refer to the various countries and geographic regions where a particular government entity or department has the authority to impose and collect tax. 

For online sellers, these taxes are often based on the movement of goods through your warehouse and fulfillment networks and transactions conducted through various online sales channels. 

To complicate matters further, these tax jurisdictions can operate at various levels within a specific region. For example, VAT thresholds and rates may differ across multiple countries within an economic area like the European Union. Similarly, sales and local taxes may vary from state to state in the US. Paying the correct level of tax in the jurisdictions you sell to isn’t negotiable. So it’s essential to understand the tax implications of selling to customers in each jurisdiction you operate.     

What are the types of taxes affecting ecommerce sellers?

Okay, let’s get into the nitty gritty. Online retailers selling globally should be aware of and comply with a wide range of taxes. 

These include: 

• Value-Added Tax (VAT)/Goods and Services Tax (GST): Don’t let the different names confuse you. VAT and GST are essentially the same thing. They refer to a tax added to the price of goods and services at various stages of the supply chain. This “consumption tax” is typically called VAT in the UK and EU, and GST in jurisdictions like Australia, Canada, India and China.
• Sales tax: In jurisdictions like the United States, sales tax is added to the cost of goods and services at the point of sale. Online sellers must collect and pay sales tax to states or other jurisdictions where they have “nexus.” For the purpose of tax, nexus may refer to a physical presence, specific economic thresholds, or marketplace facilitator laws.
• Income tax: Income tax is paid on a business’s profits. Online sellers are subject to income tax on their net income, which is calculated by deducting allowable expenses from total revenues.
• Customs duties/Import taxes: Customs duties and import taxes are typically levied on goods imported into a country for resale or fulfillment. Online sellers moving products between global warehouse locations will pay these taxes as their goods move between jurisdictions. Taxes may also be due on individual cross-border shipments to customers. 
• Digital Services Tax (DST): Just because a product is digital doesn’t mean that it is not taxable. DST is levied on revenues generated from selling digital products and services, including eBooks, audio or video content, online courses, software, and online advertising.
• Excise taxes: Are you ready for something a little stronger than coffee yet?. If you sell goods such as alcohol, tobacco, or fuel, you’ll be responsible for paying excise duties. 
• Local taxes/fees: In addition to national and state taxes, online sellers may also encounter local taxes or fees imposed by various cities, municipalities, and other local jurisdictions.
• Employment taxes: If you employ people in your global ecommerce operations, you may need to pay employment taxes. These might include payroll taxes, social security contributions, and unemployment taxes.
• Property taxes: Online sellers with physical facilities, such as warehouses, fulfillment centers, and local offices, may be subject to property taxes.
• Environmental taxes: Several jurisdictions have started imposing environmental taxes on online sellers to cover carbon emissions, waste disposal, and recycling costs. For example, if you sell into the German market, you must comply with the German Packaging Act.

VAT and GST: What ecommerce businesses need to know

You’ll be disappointed if you’re looking for a one-size-fits-all VAT/GST system. Managing your tax obligations across multiple jurisdictions will require complying with totally different regulations, registration thresholds, filing requirements, and rates. 

VAT regulations for selling into the United Kingdom

• Registration: Online sellers must register for UK VAT if they sell goods stored in the UK to UK customers and exceed the annual turnover registration threshold. As of April 1, 2024, the UK VAT registration threshold is £90,000 (approx. $113,000) of taxable turnover in a 12-month period. Once this threshold is reached, VAT registration becomes mandatory.
• Distance selling thresholds: If an international seller sells goods to UK customers from abroad, they will still be required to register for UK VAT if they exceed the distance selling threshold. The current distance-selling threshold for the UK is £70,000 (approx $88,000) per year.
• VAT rates: International sellers registered for UK VAT must charge VAT at the applicable rate for each transaction. Currently, the standard rate of VAT in the UK is 20%. However, certain goods and services have reduced rates (5% and 0%). For example, the 5% rate is levied on some health products and children’s car seats. Meanwhile, the 0% rate is attached to many food items, books, and children’s clothes. 
• Import VAT: Import VAT is generally payable at the point of a product landing in the UK. Sellers importing goods in the UK can pay import VAT themselves at the time of importation or have their customers pay it upon delivery. However, import VAT should always be collected for goods not exceeding £135 (approx. $170) in value at the point of sale. This process simplifies customs clearance and ensures customers aren’t presented with any unexpected additional fees when receiving their items.
• VAT payments and reporting: Overseas online sellers registered for UK VAT must file their VAT returns and remit payments to HM Revenue & Customs (HMRC) according to their reporting requirements. VAT returns are typically filed quarterly, although some businesses may qualify for annual filing.
• Invoicing and record-keeping: International sellers must issue VAT-compliant invoices for sales to UK customers and maintain accurate records of their transactions. Invoices should include specific information, such as the seller’s VAT number, the customer’s details, and the applicable VAT rate applied.
• Tax representation: Non-UK online sellers may need to appoint a tax representative in the UK if they do not have a fixed establishment there. The tax representative will act as a point of contact between the seller and HMRC and take responsibility for filing VAT returns and fulfilling other VAT obligations on behalf of the seller.

VAT regulations for selling into the European Union 

The European Union is made up of 27 nations in a single trading block. While specific rules govern VAT across the EU, each country also has its own regulations to comply with. 

• VAT registration: Online sellers outside the EU must register for VAT in an EU member state if they store goods in the region for sale to EU citizens. This requirement applies to all sellers regardless of their turnover. 
• Distance selling thresholds: Non-EU online sellers may be required to register for VAT in an EU member state if their sales exceed the distance selling thresholds of specific EU countries. These thresholds vary by country but typically range from €35,000 to €100,000 (approx $38,000 to $108,000) annually. Once the threshold is exceeded, VAT registration is mandatory.
• VAT rates: Sellers must charge VAT at the applicable rate for each EU country where they are registered for VAT. Yet again, the VAT rates vary among the various EU member states, with standard rates ranging from 17% to 27%. Sellers must determine the correct VAT rate for each transaction based on the destination country at the point of sale.
• Import VAT: When goods are shipped into the EU, import VAT is generally payable on entry. International sellers may choose to pay import VAT themselves at the time of shipping or have the customer pay it upon delivery. To simplify the customs clearance process, import VAT should be collected at the point of sale for goods with a value not exceeding €150 (approx. $162).
• VAT payment and reporting: International online sellers registered for VAT in an EU member state must file their VAT returns and remit payments to the relevant tax authorities according to that country’s reporting requirements. VAT returns are typically filed monthly, quarterly, or annually, depending on the seller’s turnover and the member state’s regulations.
• Invoicing and record-keeping: Global sellers must issue VAT-compliant invoices for sales to customers within the EU and maintain accurate records of their transactions, including VAT amounts collected and remitted. Invoices should detail specific information, including the seller’s VAT number, the customer’s details, and the applicable VAT rate.
• Tax representation: Some EU countries will require non-EU sellers to appoint a tax representative resident in the EU for compliance purposes. The tax representative will act as a liaison between the seller and tax authorities and be responsible for filing VAT returns on behalf of the seller.

GST regulations for selling into Canada

• Registration: International sellers must register for Canadian GST if they sell taxable goods and services into Canada above registration thresholds. Currently, the registration threshold for GST is $30,000 CAD (approx $22,000) in annual worldwide taxable sales.
• Voluntary registration: Ambitious online sellers who haven’t yet reached the registration threshold may voluntarily register for GST. This voluntary registration enables sellers to collect and remit GST, providing a competitive advantage and simplifying the customer experience.
• GST rates: The GST rate in Canada is currently set at 5%. In addition to this, some Canadian provinces have implemented additional taxes known as Provincial Sales Tax (PST) and Harmonized Sales Tax (HST). The HST combines the federal GST and PST into a single tax. Rates will vary by province.
• Point of sale taxation: Online sellers must charge GST at the correct rate for each transaction. The GST should be calculated and applied based on the customer’s province of residence.
• Registration process: Overseas online sellers should register for GST with the Canada Revenue Agency (CRA). Once registered, sellers will be issued a GST registration number and required to collect and remit GST on taxable sales to Canadian customers.
• Filing and remittance: GST returns are typically filed quarterly, although some businesses may qualify for annual filing.
• Imported goods: For goods imported into Canada, online sellers may be required to pay GST and any applicable duties when the goods land in the country. Importers may benefit from the GST Importer’s Direct Security (IDS) option or the Courier Low-Value Shipment (LVS) program to defer GST payments until the goods are sold.
• Record-keeping: Online sellers should keep accurate records of all sales transactions, including any GST collected and remitted, to support their GST filings.

GST regulations for selling into Australia

• Registration: Online sellers must register for Australian GST if they sell taxable goods and services into Australia over the registration threshold of $75,000 AUD (approx $49,000) in annual turnover. 
• GST rate: The current GST rate in Australia is set at 10%. 
• Registration process: Sellers outside Australia can register for GST with the Australian Taxation Office (ATO). Once registered, sellers will be issued with a GST registration number and then must collect and remit GST on all taxable sales to Australian customers.
• Filing and remittance: GST returns are typically filed quarterly, although some businesses may qualify for annual filing.
• Imported goods: Online sellers must pay GST on goods imported into Australia at the time of importation. Australia operates a low-value imported goods (LVIG) regime, which requires international sellers to collect and remit GST on goods valued at $1,000 AUD or less at the point of sale.
• Marketplace facilitator rules: Australia has implemented marketplace facilitator rules, which require online marketplaces, including Amazon and eBay, to collect and remit GST on behalf of third-party sellers on their platforms. 
• Record-keeping: Online sellers must maintain accurate sales transaction records, including GST collected and remitted, to support their GST filings.

Sales taxes in the United States

Unlike many other countries, the United States does not have a VAT/GST system. Instead, the US relies primarily on sales tax, which is set by individual states and, in some cases, local jurisdictions.

• Registration: Non-US online sellers must register for sales tax in the individual states where they have nexus. A nexus is a legal connection between a business and a state that creates a sales tax obligation. Nexus can be established through various means, including having a physical presence, like an office or a warehouse, or reaching a certain level of sales or transactions.
• State sales tax rates: Each state in the US has its own sales tax rate, which can vary significantly. Additionally, some local jurisdictions within states may impose additional local sales taxes. Sellers must charge the appropriate sales tax rate based on the location of the buyer’s delivery address.
• Economic nexus laws: Many US states have enacted economic nexus laws. These laws require remote sellers (including international sellers) to collect and pay sales tax if they exceed certain financial thresholds regarding sales revenue or transaction volume in the state.
• Filing and remittance: International sellers registered for sales tax in US states must file sales tax returns and pay collected sales tax to the respective state tax authorities. Filing frequency and deadlines vary by state and may be monthly, quarterly, or annually.
• Tax exemptions: Some states may exempt specific products or services from sales tax. Other products may be subject to special rules or reduced rates. Sellers should understand the tax status of their products in each state where they have nexus to guarantee accurate tax collection.
• Marketplace facilitator laws: Some US states have implemented marketplace facilitator laws, which require online marketplaces, including Amazon and eBay, to collect and pay sales tax on behalf of third-party sellers. 
• Record-keeping: Online sellers must maintain accurate sales records, including sales tax collected and remitted, to support their sales tax filings.

Taxes in India and China

While many Western sellers will be very familiar with sourcing stock from markets like India and China, these vast nations also represent a significant opportunity to sell into. 

The Indian ecommerce market is estimated to grow fivefold, reaching $350 billion by 2030. Meanwhile, China is set to eclipse this figure, with estimates suggesting that ecommerce sales will approach a staggering $4 trillion by 2027. While both countries have a growing demand for high-quality Western brands and luxury goods, sellers hoping to target these customers must first get to grips with local tax regulations.

Luckily, both countries’ tax laws translate reasonably well into something recognizable in the West, with both India and China operating GST and VAT systems, respectively. That doesn’t always mean the process is simple. Having a good local tax advisor will aid the process, and (if you haven’t fallen asleep already), help you sleep at night.

GST regulations for selling into India

• Registration: Online sellers must register for Indian GST if they sell taxable goods in India over specific registration thresholds. The registration threshold for GST purposes for online sellers selling physical products in India is Rs. 40 lakh (approx. $48,000) in annual turnover. A threshold of Rs. 20 lakhs (approx. $24,000) exists for the supply of services.
• GST rates: The GST rate in India varies wildly depending on the type of goods being sold. There are five central GST rates: 0%, 5%, 12%, 18%, and 28%. It’s not always immediately apparent which rates will apply to specific products. For example, some food products are zero-rated, while others attract a GST of 5, 12, and 18%. Not all of these 18% rate products would be considered luxury goods – for example, pasta. You’ll need to do your research.
• Registration process: Online sellers can register for GST with the Goods and Services Tax Network (GSTN). Once registered, sellers will be issued a GST registration number and required to collect and remit GST on sales to Indian customers.
• Filing and remittance: GST returns in India are typically filed monthly, quarterly, or annually.
• Imported goods: Online sellers may be required to pay GST and applicable customs duties during importation.
• Marketplace facilitator rules: India has implemented marketplace facilitator rules, which require online marketplaces, including Amazon and Flipkart, to collect and remit GST on behalf of third-party sellers.
• Record-keeping: Online sellers must maintain accurate records of their sales transactions, including any GST collected and remitted, to support their GST filings.

VAT regulations for selling into China

OK, we’ve saved the most complex jurisdiction to last. Just researching this section gave our writer a headache. While we recommend seeking expert tax advice when selling into all the countries covered in this article, China is a particularly complex jurisdiction. 

• Registration: VAT regulations in China are complex and subject to change. This is particularly true for non-resident companies. Businesses should consult with local tax authorities or seek professional advice to determine their VAT registration obligations and ensure compliance with relevant regulations.
• VAT rates: China applies different VAT rates to various products. The standard VAT rate is 13%, with lower rates of 9% and 6% applying to specific goods and services.
• Filing and remittance: Online sellers registered for VAT must file returns and remit collected VAT to the local tax authorities according to the reporting requirements. VAT returns in China are typically filed monthly or quarterly, depending on turnover and the type of registration.
• Imported goods: Online sellers may be required to pay VAT and applicable customs duties during importation. 
• Record-keeping: Online sellers must maintain accurate records of sales transactions, including VAT collected and remitted, to support their VAT filings and compliance efforts.

How Linnworks can help you stay compliant 

Still with us? Good. 

We know that the topic of tax can be dry — and not in the good way like a glass of Merlot.

Staying compliant with various international tax rules and regulations can often involve a lot of heavy lifting. Nobody likes paying VAT and tax, but nothing will unravel your business faster, potentially putting you in a whole lot of jeopardy than falling foul of the VAT authorities.

Partnering with a good accountancy solution will ensure your international tax obligations are calculated correctly and paid on time. Linnworks integrates with various software tools designed to streamline your accounting and tax processes. Because Linnworks has clear oversight of your entire inventory, regardless of where it is stored or sold, much of that heavy lifting can be automated, saving time and money and reducing the risk of filing errors.

To learn more about how Linnworks and our partners can help your business comply with various international tax obligations, contact one of our ecommerce experts here or request a demo today.