On 1st July 2021, the EU is making changes to its VAT rules. This will affect shipments to the EU, and those made between EU countries.
The EU is removing the €22 VAT exemption for imports
From July, VAT will be charged on imports to the EU regardless of value. This means the exemption for goods valued up to €22 no longer applies.
VAT will apply at the rate of the buyer’s country of residence. It is not the same for every EU country.
For goods valued up to €150, businesses can use the IOSS
When importing goods valued €150 or less, businesses will be able to charge VAT at the point of sale by using the EU’s new Import One-Stop Shop (IOSS). This excludes goods subject to excise duty.
Alternatively it can still be collected from the receiver, but the IOSS is designed to make the process smoother, helping to avoid unexpected customs and carrier admin fees for your customers.
For more information on the IOSS, please see our help article.
The EU is changing the distance selling VAT threshold regime
Until now, EU businesses have had to register VAT in each EU country in which they sold goods, and charge customers their domestic VAT rate once sales hit a certain threshold.
From July, this threshold is being removed and the VAT rate must be charged from the first sale.
However, businesses can choose to close their VAT registrations in different EU countries and file all sales through a single One-Stop Shop (OSS) VAT return. VAT would be paid to the home VAT authority of the EU country of registration, then forwarded to the relevant EU countries of your buyers.
The VAT rates of those countries would still apply and you would need to charge your customers accordingly.
There is an exception for EU businesses that sell less than €10,000 per annum cross-border on business-to-consumer (B2C) goods and services. These businesses can charge their domestic VAT rate and report sales in their usual domestic VAT return.
Online marketplaces will collect VAT rather than their sellers
For business-to-consumer (B2C) transactions made through online marketplaces, VAT liability (collecting and reporting) for sales in EU countries will fall on the marketplace rather than the third-party sellers who use it, if the consignment is valued less than €150. The marketplace will be recognised as the supplier.
This applies for both domestic and cross-border transactions. It means that businesses using online marketplaces may be able to end their VAT registrations in EU member states, as they will no longer be responsible for collecting and reporting VAT.
|(I)OSS registration links|
For more information, visit the European Commission website.
Please note that this article is intended as general information only and you should refer to the European Commission guidance or official legal advice in relation to your tax liabilities, as well as for the most up-to-date advice.