New VAT Changes for EU Sales
VAT for EU sales is about to change, here's what you need to know.
From the 1st July 2021:
- End of the Low Value Consignment Relief
Goods under €22 shipped to the EU will no longer be exempt from VAT and customs.
- Orders below £135/€150 into the EU
Orders despatched from outside the EU will require the customers local VAT rate to be charged at checkout & remitted to EU (See info on IOSS)
- Online marketplaces will be liable for handling the VAT
For non-EU businesses selling goods with a consignment value below £135/€150 to EU customers through an online marketplace, the marketplace will be responsible for handling VAT. (This already applies to EU businesses selling to the UK)
- Orders above £135/€150 into the EU
VAT and import duties will be charged at customs. The parcel carrier will pass this charge to the seller or customer depending on your shipping options
- IOSS for VAT
Non-EU B2C business despatching goods from outside the EU will be able to register for the IOSS (Import One Stop Shop) in one EU member state to collect and report VAT for all their sales into the EU. IOSS is limited to consignments under £135/€150
- OSS for VAT
EU and Non-EU B2C business, holding stock in the EU, will be able to register for the OSS (One Stop Shop) in one EU member state to collect and report VAT for all sales to other EU countries.
Shipping to the EU from abroad
From the 1st July you will need to charge your customers local VAT rate at checkout. This applies to all orders below £135/€150 and despatched from outside the EU, to customers in the EU. However, if you are using a marketplace then they will be responsible for collecting this VAT.
If your orders shipped into the EU are over £135/€150, VAT and any import duties will be charged at customs, the parcel carrier will handle this and charge it back to either you or the buyer at the point of delivery. If you are shipping DDP, you will be charged for the VAT and duties if you are shipping DAP or DDU the buyer will be charged VAT and duties.
As a non-EU B2C business, if you are charging VAT at point of sale you will be able to do this through the new IOSS (Import One Stop Shop). This allows you to register for VAT in one EU state to declare the VAT on any orders with a value below €150. This is also known as the ‘non-Union scheme’. You can register on the IOSS portal of any EU Member State.
You will need to charge your customers their local VAT rate, and you must declare EU VAT each month and remit the total in an online tax return. The major benefit is that your consignments will be treated with a 'VAT exemption' at customs, speeding up the process so that they reach customers faster.
Unfortunately goods subject to excise duties (such as alcohol and tobacco) and used goods (including refurbished tech, and second hand items) are not covered by the IOSS.
Shipping from an EU warehouse
The OSS allows both EU and Non-EU businesses despatching from within Europe who have more than €10,000 in sales to other EU countries per year, to register for VAT in one EU state through which they can collet VAT for all their EU sales. You will need to charge customers their local VAT rate at checkout then file through a single OSS VAT return. If you have less than €10,000 in sales to other EU countries per year, you can continue to trade under your local VAT rules.
From the 1st July B2C sellers will be able to make use of the new OSS (One Stop Shop) scheme that replaces the old distance selling rules. However, non-EU businesses using EU warehouses or fulfilment centres will still require a local foreign VAT registration for the country in which you hold stock.
If a seller is not EU based then an EU intermediary may need to be appointed in order to fulfill the seller’s VAT obligations under OSS.
If you don't use the OSS you will need to be VAT registered in each EU destination country once you exceed the €10,000 sales threshold.
For example: if Business X, holds stock in France and sells €4,000 of goods (excluding postage, packaging, and other fees) to each of Germany, Spain, & Belgium, the combined total of €4,000 exceeds the €10,000 pan-EU threshold. Thus the seller is required to account for VAT in each of these countries. Instead of registering for VAT in each of these countries, they can register for the OSS in France and make one declaration for all of the sales.
The benefits of using an EU warehouse as a non-EU business
If any of these 6 points apply to you and you want to sell to EU customers then using a warehouse based in Europe the best option:
- You often have orders over €150 in value (this includes multiple products in a single order)
- You sell goods subject to excise duties such as alcohol and tobacco
- You sell used or refurbished goods
- You sell to businesses in the EU (B2B)
- Your EU customers want fast delivery
- Your EU customers want cheap delivery
The first four points disqualify you from being able to use the IOSS and therefore shipping to the EU becomes more complex and expensive. The last two points apply to everyone - If you want to offer your European customers cheap or fast delivery then shipping from the EU: Eliminates delays at the border, removes customs handling fees, and reduces the distance the products have to travel cutting both costs and time, not to mention the environmental benefit!
Actions to take
- Speak to the experts at Bezos about how your business can benefit from a European fulfilment solution
- If you will be shipping orders under €150 from the UK to the EU, register for IOSS
- Display your customers local VAT rates at checkout
- If you are using an online marketplace check that you are setup for EU sales