EU VAT E-Commerce Package
The EU VAT e-commerce package will be introduced on 1 July 2021 and will impact businesses that supply:
- Low-value (below €150) goods to Northern Ireland (NI) or the EU from outside of the EU or NI.
- This includes goods sent from Great Britain (GB): England, Scotland and Wales.
- Goods from the EU to non-VAT registered consumers in NI.
- Goods from NI to non-VAT registered EU consumers.
Some online marketplaces and their users will also be affected.
- A single EU-wide VAT threshold of £8,818 (€10,000) will be introduced for Business to Consumer (B2C) sales of goods between EU member states.
- Existing country-specific distance selling thresholds will be removed.
- This €10,000 VAT threshold will also apply to B2C goods sold to and from NI.
- The One Stop Shop (OSS) will be introduced to declare and pay VAT on B2C supplies of goods within the EU.
- Low-Value Consignment Relief (LVCR) will be removed.
- LVCR provides a VAT exemption on the importation of goods up to €22.
- The removal of LVCR will mean that:
- All goods imported into the EU will be subject to VAT.
- Businesses may need to consider multiple EU member state VAT registrations if they import goods to a number of EU member states. Alternatively, they may be able to register for a simplification scheme.
- The Import One Stop Shop (IOSS) will be introduced to declare and pay VAT on the import
of low-value consignments.
- Online Marketplaces (OMPs) will be liable to collect and account for VAT on some goods
supplied to consumers.
One Stop Shop (OSS)
On 1 July 2021, the distance selling VAT thresholds in each EU member state, which apply to distance B2C supplies within the EC, will be removed and replaced with a single pan-European threshold of €10,000 (£8,818).
- The €10,000 threshold will apply to total cross-border B2C sales and not on a country-by-country basis as with previous thresholds.
- Since 1 January 2021, the distance selling thresholds apply to EU cross-border supplies: GB businesses no longer benefit from the thresholds.
This change is likely to create multiple EU member state VAT registration obligations.
The One Stop Shop is introduced as a simplification measure.
- Businesses will register for VAT in a single EU member state or the UK.
- The OSS will allow VAT on eligible supplies of goods across all EU member states to be reported and paid via a single quarterly return.
- This simplifies the need to register for VAT and report, in multiple EU member states.
- UK businesses will only be able to register for the OSS Union Scheme where they:
- Are VAT registered.
- Operate under the Northern Ireland Protocol.
- Sell goods exceeding £8,818 (€10,000) to consumers in EU countries from NI.
- OSS registration can be made from 1 July 2021.
Import One Stop Shop (IOSS)
The IOSS is intended to simplify the declaration and payment of VAT on distance sales from non-EU countries, to the EU, with an intrinsic value of £135 (€150) or less.
- The intrinsic value of a consignment is the price the goods were sold at, excluding discrete postage and packaging charges etc.
This simplification will be particularly valuable to businesses impacted by the removal of Low-Value Consignment Relief (LVCR) on 1 July 2021, which will (in the absence of the IOSS) result in all imports into the EU being subject to VAT, with no de-minimis.
- Suppliers and online marketplaces making distance sales to the EU can use the IOSS to declare and pay sales VAT to the relevant authority via a single return rather than either (depending on the terms of trade):
- Charging local sales VAT on the sale and reporting it directly to the relevant authority, potentially requiring multiple VAT registrations and returns.
- The purchaser paying import VAT at the point of importation.
- The IOSS covers the sale of goods from a distance that are.
- Dispatched or transported from outside of the EU at the time they are sold.
- Dispatched or transported in consignments with a value not exceeding a total of €150 (low-value goods).
- Not subject to excise duties (typically applied to alcohol or tobacco products).
- The rate of sales VAT charged will be the rate that applies for the goods in the EU country where they are being sold.
- The VAT charged is declared via a single monthly IOSS return to the member state in which the supplier chose to register.
- Where businesses are already established in the EU, this may create a registration obligation in that particular territory. This may influence the decision on where IOSS registration is made.
- The IOSS return will record:
- The total value of goods sold.
- The total VAT payable.
- The rates of VAT for each member state where sales have been made.
- When using the IOSS, you must:
- Provide the information required for customs clearance in the EU, including the IOSS VAT identification number to the person declaring the goods at the EU border.
- Display the amount of VAT to be paid by the buyer in the EU, at the latest when the ordering process is finalised.
- To the extent possible, show on the invoice the price paid by the buyer in EUR.
- Keep records of all eligible IOSS sales and/or sales facilitated over 10 years.
- Businesses can register on the IOSS portal of any EU Member State from 1 April 2021.
The IOSS system will not be available in the UK from 1 July. Until the system is fully implemented businesses can register in any EU member state.
A business sells £50 of goods, from GB stock to a Spanish consumer. There are three scenarios:
- The customer will pay Spanish import VAT when the goods arrive in Spain. This additional cost may not be well received by the customer.
- The business registers for VAT in Spain and acts as an importer. The business will account for import VAT and recover it where allowed under the Spanish VAT rules. Spanish VAT will be charged to the customer, by the business, at the time of sale. This may require multiple EU VAT registrations where customers are situated in multiple territories, but it shelters the
customer from unexpected import VAT charges.
- The business registers for the IOSS. Spanish VAT will be charged to the customer, by the business, at the time of sale. The Spanish VAT is accounted for in the IOSS return, which will cover sales made in any EU country by the business: only one VAT registration is required. Import VAT is not payable, as VAT is accounted for under the IOSS.
Businesses that use online marketplaces, such as eBay and Amazon, to sell to EU customers may not need to account for VAT on their sales from 1 July 2021.
Under the new rules, the online marketplace will become the deemed seller and liable to account for the VAT on the supplies where:
- A B2C supply is made into the EU from a non-EU country, with a consignment value below €150 (£135).
- A distance sale is made within the EU, but the seller is not established in the EU.
- A B2C domestic sale is made within the EU, but the seller is not established in the EU.
A trader based in England sells £80 of goods to a consumer in France, via eBay.
- The trader is deemed to have sold the goods to eBay. This deemed supply is not subject to VAT.
- eBay will collect VAT on the sale from the consumer and declare it under their IOSS registration.
It is important that the English trader shares eBay’s IOSS number electronically with the carrier as EU Customs need to identify that VAT has been paid on the goods imported. Where this is not done, the French purchaser may have to pay import VAT in addition to the sales VAT paid to eBay.