The new VAT e-commerce rules in the EU
Major changes to EU VAT rules for e-commerce take effect in July 2021, affecting UK businesses selling goods online to EU consumers.
On 1 July 2021, the EU is introducing sweeping changes to its VAT rules for cross-border business-to-consumer (B2C) e-commerce. These changes are designed to simplify VAT compliance for online sellers and ensure fairer competition between EU and non-EU businesses.
For UK e-commerce businesses selling goods to consumers in the EU, these new rules require significant adjustments to pricing, checkout systems, and VAT registration strategies.
Abolition of the low-value consignment relief
Currently, goods imported into the EU with a value of €22 or less are exempt from import VAT. From 1 July 2021, this exemption will be abolished. All goods imported into the EU, regardless of their value, will be subject to VAT. This means UK sellers dispatching low-value items to EU consumers must decide how this VAT will be collected and paid to avoid unexpected charges and delays for their customers at the border border-border.
The Import One Stop Shop (IOSS)
To simplify the collection of VAT on low-value imports (consignments valued at €150 or less), the EU has created the Import One Stop Shop (IOSS). If a UK seller registers for IOSS in a single EU member state, they can charge the applicable EU VAT at the point of sale on their website. They then declare and pay this VAT via a single monthly IOSS return. Goods shipped with an IOSS number are fast-tracked through customs without the customer having to pay import VAT or handling fees upon delivery.
Online marketplaces as deemed suppliers
The new rules also place greater responsibility on online marketplaces (such as Amazon or eBay). If a UK business sells goods to EU consumers through an online marketplace, and the goods are imported into the EU in consignments of €150 or less, the marketplace will be 'deemed' to have made the sale for VAT purposes. The marketplace will be responsible for collecting the VAT from the consumer at checkout and declaring it to the tax authorities, relieving the underlying seller of this compliance burden.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.