The New EU VAT Reforms - What You Need to Know

Things to keep in mind as you prepare your first shipments after Brexit

Effective 1 July 2021, significant changes to the European Union’s Value Added Tax (VAT) rules will come into effect, impacting imports into the EU valued up to €150. While these reforms primarily target B2C e-commerce shipments, they also impact B2B shipments.

These new rules are likely to require changes to e-commerce business systems and procedures.

If you sell goods online to EU consumers, we recommend that you start preparing your business in advance.

The key changes that will take place when the EU VAT Reform comes into play on the 1st of July are:

VAT Practices Before 1 JulyVAT Practices as of 1 July 2021

All goods with an intrinsic value up to €22 de minimis that are imported into the EU are exempt from VAT

The EU will remove the €22 de minimis, meaning goods up to this value imported into the EU are no longer exempt from VAT

E-commerce businesses selling goods directly to EU consumers are required to register for VAT payments in each EU country that they sell to, depending on local regulations

E-commerce businesses selling goods valued up to €150 directly to EU consumers can register, declare and pay VAT in the EU through the new IOSS platform. This requires only a single registration for the payment of sales VAT throughout the EU

Businesses selling goods to EU consumers through online marketplaces are responsible for determining the intrinsic value of the goods sold, and declaring and paying the VAT if this is collected at the point of sale

Online marketplaces will be responsible for determining the intrinsic value of goods sold on their platform, and if this is within the €150 threshold, charge the VAT rate of the destination country to the consumer at the point of sale.

The online marketplace is then responsible for declaring and paying the VAT from those goods through the new IOSS platform

For a closer look at how the upcoming changes will affect the current practices for imports into the EU, check out our EU VAT reform guide.

EU VAT Reform

Download our EU VAT Reform Guide

Why are the changes taking place?

The EU has 3 objectives in mind that will come out of the VAT reform:

weigh scale

Level the playing field for EU businesses in relation to VAT

shop bag

Facilitate Cross-Border E-Commerce

fraud

Tackle E-Commerce VAT Fraud

For a detailed explanation regarding the three above mentioned points, please consult this section of the EU VAT reform guide.

What does it mean for your business?

The impact the new EU VAT reform has on your business depends on the value of the goods you sell, if you sell to businesses or consumers and whether you use online marketplaces.

Consignments up to €22 will no longer be exempt from VAT. This will impact all businesses shipping into the EU whether shipping to consumers or businesses.

For goods sold with a value up to €150 directly to consumers, you will have two options: either charge customers VAT at the point of sale and declare it to the EU or UPS declares VAT at the point of import and charges your business.

For goods sold with a value above €150, you can continue to charge, declare and pay EU VAT as you do today: Either paying VAT at the point of import through your customs declaration, or making your customer liable for VAT payments.

If you would like to learn more about how the VAT reform might impact your business, have a look at our EU VAT reform guide.

For additional information on the responsibilities that the EU VAT reforms place on online marketplaces, check out the following sites:

European Commission Website

European Commission VAT Reform Q&A

Important – EORI Number

If you ship to a European Union member state, you need to have an EORI number (Economic Operator’s Registration and Identification number). This number will be used by customs to identify the sender and their parcels across all EU countries. Download our EORI Registration Guide for more information.

Rest assured that we have taken steps to be fully prepared in anticipation of the new rules coming into play this July. We have been working at EU and Member State levels to ensure that our own systems, as well those of country customs authorities, are ready to process the changes.

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