Updated: Jan 27
18 June 2021
On July 1, 2021, the European Union will introduce changes to the existing VAT regime that will impact UK-EU trade. This memo covers the key points that will affect UK-EU trading that you should be aware of.
1. Removing the €22 VAT exemption for imports
The exemption for goods valued up to €22 no longer applies. Therefore, VAT will be charged on imports to the EU regardless of value. VAT will apply at the rate of the buyer’s country of residence. It is different for every EU country: for example, Italy – 22%, France – 20%, Germany – 19% etc.
2. One-Stop-Shop (OSS) and Import One-Stop-Shop (IOSS)
OSS and IOSS. The EU will introduce two measures to assist e-commerce, two “one-stop-shop” procedures, which will allow e-sellers to consumers to account for VAT, without the need for multiple EU VAT registrations, from July 1, 2021.
a) One-stop-shop (OSS) will be applied firstly for EU countries. This OSS return is an extension of the existing EU MOSS system for digital services. However, the OSS return cannot be used for UK businesses that hold stock inside the EU or use the Fulfilment by Amazon (FBA) programme.
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. b) Import one-stop-shop (IOSS). UK businesses selling goods from outside the EU to private consumers valued at less than €150 can register for IOSS in just one EU state. They will be issued a unique IOSS identification number which should be listed on all packages sent to the EU. This will indicate to Customs that VAT is being properly declared and help ensure speedy customs clearance. Like the OSS, IOSS will be a quarterly filing submitted to a tax authority in one nominated EU member state. It will declare import VAT due in all EU countries.
c) In the case of IOSS, import VAT will then be payable in accordance with the VAT rate in the customer’s member state (using the delivery address) in a quarterly return submitted in the member state where registered. This is different to a standard EU VAT registration as it provides for VAT due in every member state to be reported and paid through a single return. On consignments below €150, the seller can instead use simplified customs declarations, which requires about 1/3 of the data needed for standard declarations. Please note that the duty exemption for consignments less than €150 is expected to remain in place.
d) For consignments greater than €150, normal customs declarations and payment will be required (either by the seller or its agent – including postal service). Duty will also be payable.
Northern Ireland. NI VAT would need to be paid once the annual distance selling threshold is exceeded. From July 1, 2021, distance selling thresholds will be abolished, and VAT due on supplies to customers in EU countries will need to be accounted for under the One-Stop-Shop (OSS).
3. Online marketplaces (OMP)
There are special rules for online marketplaces (OMPs) where they are involved in facilitating the sale. In this case, they are responsible for collecting and accounting for VAT. EU marketplaces facilitating sales to EU consumers (such as Amazon) will become responsible for the VAT on the third-party supplier’s behalf, so if selling products through such marketplaces, the VAT will be taken care of at the point of sale by the marketplace provider. The marketplace will be recognised as the supplier.
This applies to 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.
If you have any questions or issues regarding VAT, OSS, IOSS, trade with EU, we will be happy to help assist you.
For further information on any of the points above contact
Mikita Makayou at firstname.lastname@example.org, or
Dr. Frank at email@example.com.