EU VAT rule change and Import One Stop Shop (IOSS)
Introducing the new EU VAT scheme and what this means for shipping to the European Union.
Helping you get ready for the EU’s VAT e-commerce changes on 1 July 2021
Major changes with regards to EU Value Added Tax (VAT) are coming to e-commerce businesses on 1 July 2021 and it is important that you are fully aware of, and ready to deal with, these changes by that date.
On 1 July the €22 VAT exemption on goods imported to the EU will be removed. This will mean that all goods irrespective of value will be subject to VAT in all EU countries. These changes are being introduced by the European Union in relation to the collection of VAT for goods sold to consumers – and impact both online marketplaces and overseas sellers. The changes will mean that all goods sold and sent directly from the UK to private individuals in the EU are subject to local VAT in the destination country where your customer is a resident.
The changes to the EU’s VAT rules
Until 1 July 2021 consignments with a value not exceeding €22 are relieved from import VAT and customs duty in most EU countries. This is called the Low Value Consignment Relief (‘LVCR’). Some member states have adopted a €10 or an even lower or nil threshold (e.g. in Sweden it's SEK 0). On 1 July 2021 the EU is set to remove the LVCR entirely. The implication of this is that from this date every single UK to EU item, regardless of value, will attract VAT (and customs duty where applicable). The rate of VAT varies by country and will be payable at the rate applicable in the recipient’s country.
The options available
euroeconomy - Delivery Duties Unpaid (DDU) service
Delivery Duties Unpaid (DDU), is a service where the overseas post or parcel operator will collect the import VAT (and customs duty, if payable) from the EU buyer prior to delivery, alongside a handing fee. Using these services requires no change for customers but it’s important that you continue to provide customs data for items of non-personal correspondence.
europriority - Delivery Duties Paid (DDP) service
As an alternative to euroeconomy, we have a Delivery Duties Paid (DDP) service that allows the shipper to calculate and collect from their customer at the checkout an additional amount that will cover the cost of import VAT and customs duty alongside the handling fee. This will help to avoid unexpected charges and delivery delays to the end recipient, improving the overall customer experience.
The Import One Stop Shop (IOSS)
The Import One Stop Shop (IOSS) is being introduced by the EU, to enable and simplify the declaration and payment of VAT for distance sales of imported goods – with a value up to €150.
The Import One Stop Shop (IOSS) is the electronic portal, your business can use from 1 July 2021 to comply with the new VAT e-commerce obligations on distance sales of imported goods. Once registered for IOSS, VAT can be collected at the checkout and paid directly to EU customs authorities in monthly, EU, VAT returns. No additional customs handling fees will be applied when the parcels arrive in the EU customs facility, speeding up the release into free circulation of the goods to your customer.
Parcelforce Worldwide are currently working hard behind the scenes on how you send items with us under the IOSS scheme, should you register yourself, but also to assist you in registering with and operating within the IOSS framework. These solutions will allow goods to be sent to customers in the EU with VAT paid – quickly and simply. Items valued over 150€ will need to be sent DDU or as postal DDP. Once these are fully tested and operational, we will provide further details here on the Parcelforce Worldwide website.
The new rules could impact how you do business in the EU. You can find more information about these changes here, which the European Commission has published. Here is further guidance provided by the UK Government on these changes.
Please note: In accordance with Government guidance, if you are dispatching goods from Northern Ireland to the EU, IOSS cannot be used to declare and pay VAT on your EU sales. Instead, you can make use of the One Stop Shop (‘OSS’) which is another EU VAT scheme that allows you to declare and pay VAT on all sales into the EU in one single VAT return. Alternatively, you can register for and pay VAT in each member state you are selling goods to. If your overall annual sales from NI to the EU doesn’t exceed €10,000 you can continue to charge UK VAT to you EU customers.