On the 1st of July 2021, the EU will update its VAT system for goods imported from outside the EU. The idea is to simplify and standardise the taxation of cross border supplies of goods and services. See below for our overview of what this means to UK ecommerce businesses and marketplaces exporting to the EU.
The new rules are intended to combat fraud and to provide a fairer and more transparent tax system.
Up until the 1st July 2021, all commercial goods imported into the EU face no VAT if they are valued under €22. However, this is subject to change.
As of the 1st of July 2021, the €22 low-value limit is being removed which means all commercial goods valued from €0 will be subject to VAT. The rate of VAT varies depending on the EU country the customer resides in. For commercial goods valued above €150 customers are still obliged to pay customs duties upon importation into the EU.
To ensure a smooth transition to the new VAT system, the EU has created the Import One-Stop Shop (IOSS). The IOSS is the electronic portal businesses can use from the 1st of July 2021 to comply with their VAT ecommerce obligations on importing commercial goods from outside the EU.
The IOSS saves you and your customers headaches by providing standardised and simplified VAT solutions. You can offer your customers a transparent and hassle-free shopping experience by taking care of all the VAT declarations and payments for cross-border transactions.
One of your customers in the Netherlands ordered a €50 pair of trainers, the following two scenarios would play out:
1. As of the 1st of July 2021, the trainers will be subject to a 21% VAT surcharge (€10.50) and a customs clearance fee ranging from €5 to €15. (VAT rates and customs fees vary depending on the destination country.) As a result, the customer will pay anywhere between €65.50 and €75.50.
2. If you are an IOSS supplier, the same pair of trainers will not be subject to the customs clearance fee, meaning they will only pay the VAT surcharge. This will result in a saving for your customer of between €5 – €15.
Centralised customs clearance fee
After the 1st of July 2021, there will no longer be a central clearance option for non-IOSS sellers. The VAT rate is the one applicable in the customer’s EU member state.
Reduced administrative overheads
Once your business is registered as an IOSS seller in one EU member state, you can use this registration to do business in the entire EU. The VAT return and payment is due in the country of registration.
Reduced customs clearance times
Goods imported by an IOSS seller will only be checked for a valid IOSS number before being dispatched to the customer. Goods sold through unregistered businesses can only be cleared after VAT has been collected.
Specific VAT rates
VAT under IOSS is calculated at the specific VAT rate for that product as opposed to a generic VAT rate for the country – certain products will attract a lower VAT rate based on the HS code – outside of IOSS the generic vat rate will be applied.
No additional taxes and customs fees
Customers avoid paying additional taxes and customs fees and will greatly appreciate this transparency. As a result, IOSS webshops can advertise products at the total price (including VAT).
For IOSS transactions, customers will not have to go through another procedure to pay the VAT or customs clearance fees when their goods enter the EU.
IOSS-registered goods will speed through customs thanks to the standardised system. Customers who shop through a non-registered supplier will lose a lot of time trying to get their shipments past the border.
Not based in the EU? First appoint an EU-established intermediary
If your business is not based in the EU but you still want to enjoy the IOSS benefits, you will be required to appoint an intermediary (a taxable person based in the EU to act on your behalf). The intermediary fulfils your VAT obligations on your behalf using a specific VAT identification number for your business transactions. They will file a monthly VAT return and pay the corresponding amount to the tax authorities of the member state they are based in.
Register your business
As of the 1st of April 2021, you can register your business on the IOSS portal of any EU member state. Select the IOSS portal for the EU member state of your choice and follow the registration process. Some contact details are available here
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