Selling on eBay: what are the tax implications?

If you are an eBay seller you, and not eBay, could be liable to account for VAT and income tax on your sales even though you use the eBay platform.  There are two main types of taxes you need to watch out for – VAT and income tax.


You could be liable to be registered for VAT if you are in business and you make sales transactions known as “taxable supplies”.  If your taxable supplies in the UK in the last 12 months are approaching £83,000 (in 2016-17 & this threshold keeps changing annually) or you expect to exceed this amount in the next 30 days then you must register for VAT.  If you do not you could be liable for fines, penalties and even prosecution by the authorities and your shipments could be held up.  For foreign sellers or importers the VAT threshold does not apply.  They must register for VAT for even £1 of sales.

Different EU countries have different VAT registration thresholds (or even no thresholds) and rules regarding registration.  The situation gets more complicated if you are established in one EU country and you wish to sell physical goods to customers (B2C) in another EU country.  You may be liable to register for VAT in the other member state under the VAT Distance Selling regime.

As a B2C seller on eBay the following types of VAT regime could apply to your sales:

1. Import VAT – on your sales into the EU if you are a seller based outside the Community (e.g you are based in USA, India or China).

2.  Domestic VAT – on sales within the same country that you are established in (e.g. 20{e68217344b855fcd608ed2c4c41f83644da7cd41ea524fbfa2ad06c632d3255d} VAT on UK to UK sales).

3.  Distance-selling VAT:  on sales to customers based in another EU member state (e.g. charging UK VAT initially if you are established here but when you reach the “distance selling” threshold in your customer’s country you could be liable to be VAT-registered there).

If you are exporting goods or services to customers outside the EU then you could qualify for the “zero-rate”  of VAT but you need to meet certain conditions.

From 1 July 2003 eBay has been charging VAT on listing fees charged to sellers established in the EU.  If you are registered for VAT you need to provide your VAT ID to eBay in order not to be charged VAT.   If eBay has charged you 15{e68217344b855fcd608ed2c4c41f83644da7cd41ea524fbfa2ad06c632d3255d} Luxembourg VAT you cannot recover that VAT via your domestic VAT return (e.g on your UK, German, French etc VAT returns).  A special claim must be made to recover foreign VAT.


You need to notify HMRC of the UK or the authorities of other EU member states if you are established abroad that you are a business and you need to obtain an income tax registration number from them.  The type of income tax registration and rules in calculating income (after deduction of allowable expenses) varies from country to country and also depends on the type of business entity involved.  E.g. in the UK if you are a sole trader or a partnership firm you will be liable to pay income tax (rates can go up to 45{e68217344b855fcd608ed2c4c41f83644da7cd41ea524fbfa2ad06c632d3255d}) but if you trade via a company then the company pays corporation tax.

If you are established in one EU member state but are trading in another member state via a fixed base there (known as a Permanent Establishment) then the authorities there could tax you on profits “attributable” to your fixed base there.

If you do not take proper advice in advance you may end up paying tax twice on international business.  Once in your home country and again in the overseas country on the same income.  The tax rules are extremely complex but RKG Consulting will be pleased to assist you in this regard.