NEW EU VAT RULES

In order to increase benefits for businesses and consumers, the EU is modernizing the VAT rules. The change will take place on the 1st of July 2021, and it aims to overcome the barriers to cross-border online sales, by making sure that VAT is paid where consumption of goods takes place. Every business in the e-commerce supply chain will be affected, from online sellers and marketplaces both inside and outside the EU, to couriers, right through to the end consumers.

The mere mention of the word “change” may cause some to feel uneasy, so here we are laying down the most important things to bear in mind for our fellow ‘eCommercers’.

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Online businesses
No matter what products or services they are selling, or the markets they operate in, there are two areas of change that will affect operations for online businesses.

First of all, there will now be an EU-wide threshold of 10,000EUR for distance sales of goods. Below this threshold, businesses can continue to apply the domestic rules for VAT on cross-border sales. If sales are above this threshold, online businesses are liable for VAT in the Member State where their buyers are located.

Paying VAT in another Member State can be easily done by registering in the One-Stop-Shop (OSS), the electronic portal businesses can use to comply with their VAT obligations on e-commerce sales.

Second, the VAT exemption for the importation of goods of a value not exceeding 22EUR will be removed. As a result, all goods imported to the EU will now be subject to VAT.

The Import One-Stop-Shop (IOSS) was created to facilitate and simplify the declaration and payment of VAT for distance sales of goods imported to the EU with a value not exceeding 150EUR.

If businesses register for the IOSS, the price that their customers will pay for the goods represents the final price, VAT included, with no hidden charges or fees. If businesses don’t register for the IOSS, VAT will have to be paid by their customers.
This is a very important rule to keep in mind because EU customers are used to prices including VAT. Having to pay additional fees might lead them to refuse the goods.

Both OSS and IOSS will be open for registration from 1 April 2021 and ready to use from 1 July 2021. As we feel that they are important instruments, we will follow with a more detailed article on this topic.

At OAK3, we have been developing B2C and B2B eCommerce platforms for more than 10 years. If you want to know more about our services, please contact us or drop us an email at hello@oak3.agency. We’re here to help!

Online marketplaces
The changes will apply to online marketplaces, and they will have certain record-keeping obligations. If they facilitate distance sales of goods imported to the EU with a value not exceeding 150EUR; and/or if they supply goods to customers in the EU, irrespective of their value, when the underlying supplier/seller is not established in the EU, then they are considered ‘deemed suppliers’ and will have to pay VAT.

Online marketplaces will also need to keep records for the transactions they facilitate, irrespective if they become deemed suppliers or not. Such records should be kept for 10 years and made available electronically on request by the Member States.

Same as with online businesses, online marketplaces can pay VAT in another Member State by registering in the One-Stop-Shop (OSS) and the Import One Stop Shop (IOSS).

At OAK3, we have been developing B2C and B2B eCommerce platforms for more than 10 years. If you want to know more about our services, please contact us or drop us an email at hello@oak3.agency. We’re here to help!

What’s changing for postal operators and couriers
Courier services play a crucial role in this demanding industry. The changes in VAT rules will have a direct impact on their activity, depending on retailers registering or not in the Import One Stop Shop.

If online sellers and online marketplaces are registered in the Import One Stop Shop (IOSS) to declare and pay VAT, the responsibility for the collection of the VAT will not fall on the postal operators and couriers.

Online sellers and online marketplaces who use the IOSS will need to provide couriers with the information required for the customs clearance in the EU including the IOSS VAT identification number. Electronic marketplaces not involved in the dispatch or transport of the goods will generally provide this information to the actual seller and agree on strict rules about the use of their IOSS VAT identification number, including communicating it to the carrier and/or the customs declarant.

This is necessary in order to avoid VAT being levied upon importation and to therefore speed up the release for free circulation of the goods. The end result should reduce strain at this critical stage of the supply chain.

For the sellers or marketplaces that do not register in the IOSS, the competent authorities will collect VAT on importation of the low-value goods just as VAT is collected on higher-value goods at customs now. Customers in the EU will only receive the goods bought after the VAT has been paid.

Postal operators and couriers might also charge an additional clearance fee to the customer for collecting VAT and completing the necessary formalities upon the importation of goods.

As stated before, this is a very important rule to keep in mind, because EU customers are used to prices including VAT. Having to pay additional fees might lead them to refuse the goods.

At OAK3, we have been developing B2C and B2B eCommerce platforms for more than 10 years. If you want to know more about our services, please contact us or drop us an email at hello@oak3.agency. We’re here to help!

Visit our website to find out about our services