EU July 2021 ending €22 import VAT exemption; new Import OSS return
- Jan 23, 2021 | Richard Asquith
Currently EU and non-EU sellers selling goods online to EU consumers can import the goods into the EU, directly to the consumer, import VAT-free if the consignment of good(s) is valued at €22 or below. This ends 1 July 2021 and all imports will be subject to EU VAT. Sellers and facilitating marketplaces can collect import VAT on import consignments valued up to €150. Or they may use the new Special Arrangements and have postal operators collect the import VAT. The 2021 EU VAT e-commerce package is delayed, until 1 July 2021.
This is one of three reforms as part of the July 2021 EU e-commerce VAT package. The other two reforms are:
The low-value consignment VAT exemption, termed the ‘low value consignment stock relief’, was intended to relieve customs from the burden of checking large volumes of packages for small amounts of potential tax revenues. However, it is leaving EU-based sellers at a major price disadvantage since they must charge VAT when the goods were dispatched from within the EU. The exemption has also encouraged large-scale fraud by sellers deliberately under declaring the values of goods to escape the import VAT bill.
Switching import VAT to point-of-sale – Green Channel clearance
The EU has therefore agreed to scrap the import VAT exempt threshold. Instead, it will require EU and non-EU sellers to charge VAT at the point of sale for consignments of €150 or below. This will create a more efficient ‘Green Channel’, with quick and easy customs clearance. Note – the delivery agent may still act as the import VAT collector (see below).
Sellers will charge VAT at the rate of their customer’s EU country of residence at the point-of-sale on the website. Sellers can use the delivery address of the customer to determine the country VAT rate. No VAT is due at the point of import in this case.
IOSS import VAT simplified reporting
To report the VAT charged at the point of sale, a new declaration, ‘Import One-Stop-Shop’ (IOSS), is being introduced. This will report distance selling across EU borders of imported consignments not exceeding €150. Sellers, or deemed supplier marketplaces, will have to 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. The format and due dates will be the same as the VAT OSS. Sellers will have to make a single cash payment of the VAT due to the country where they are IOSS registered.
EU sellers and the IOSS
EU sellers selling goods located outside of the EU to EU customers may also use the IOSS. It will be particularly useful where the seller’s customers are located in other EU states and the seller wants to take care of the import VAT on behalf of their consumer. It also relieves the seller of having to undertake a full VAT registration in each country it is importing into.
What will this mean for a typical non-EU seller?
Non-EU sellers, including from the UK, will have to appoint a VAT Intermediary to act as their agent in a similar way as to a Fiscal Representative. To understand the effects on a typical non-EU seller, let us consider the VAT obligations today and post-2021 reforms for an example non-EU seller, ShanghaiTrade LLC from China.
ShanghaiTrade LLC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or ShanghaiTrade LLC has to pay import VAT at the rate of the country of import. To provide a good seller experience, ShanghaiTrade LLC pays the import VAT on behalf of its customers.
ShanghaiTrade LLC will charge VAT at the point-of-sale and declare it in an IOSS return if not exceeding €150. They are then exempted from paying import VAT at customs. ShanghaiTrade LLC may also declare sales to customers around the EU via its OSS return, as discussed in the above section.
For consignments exceeding the €150 IOSS threshold, the import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for ShanghaiTrade LLC if they wish to sell the goods locally or to consumers in the rest of the EU.
IOSS is optional - Special Arrrangements - Postal service or marketplaces may declare the VAT instead
The import OSS is not compulsory for consignments not exceeding €150. Alternatively, the seller or deemed supplier marketplace may elect to have the import VAT collected from the final customer by the customs declarant. This is known as the Special Arrangements. This is generally the postal operator, courier firm or customs agent. They can settle the VAT collected with the tax authorities via a monthly payment.
In certain circumstances, marketplaces facilitating the sale will be responsible for the VAT being charged at the point-of-sale for the EU or non-EU. This is detailed in the next section.
Brexit – the effect on IOSS
The UK left the EU VAT regime on 31 December 2020. At the same time, the UK withdrew its EU £15 low-value consignment stock relief threshold on this date – from 1 January 2021. It introduced a new £135 VAT-at-point-of sale regime, similar to the EU’s €150 scheme. Non-EU sellers must charge UK customers 20% VAT, UK VAT register and the declare and pays the VAT charged to their UK customers. There is no Special Arrangements opt out as above.
For sales to EU consumers, British resident sellers arre now considered as non-EU residents. From July 2021, they will be able to use the EU IOSS as non-Union sellers. This will require them to register in any one EU state for the quarterly filing and VAT payments.
Non-UK sellers would also be able declare imports into the UK via its new pacel regime.
Simplified customs declaration
To help importers and customs authorities cope with the ballooning volume of low-value consignments, the standard customs declaration for goods not exceeding €150 is to be condensed. From July 2021, sellers will be able to provide a simplified declaration at the point of import into the EU. This is a ‘super-reduced dataset’ for the party declaring the import.
The existing duties exemption for most goods not exceeding €150 will remain in place.