The EU VAT E-Commerce Package

From 1 July 2021 the EU has implemented a number of new rules for business supplying goods or services to consumers in the EU.

Abolition of low value consignment relief

Prior to 1 July 2021 VAT was not payable on goods imported into the EU which have a value of up to €22. This relief has been withdrawn and VAT is now payable on all commercial goods when they arrive in the EU. Import VAT will be calculated using the VAT rate applicable in the EU destination country.

Note that, unless the supplier takes responsibility for the VAT, the customer may have to pay import VAT (and possibly duty) before the customer can take delivery of the goods.

Broadly, the choices available to the supplier wishing to take responsibility for the VAT are:-

• Pay the import VAT (and any duty) on behalf of the customer; or

• Charge local VAT and pay it to the local tax authority UK businesses selling goods into the EU will have to consider how any VAT is to be paid and how this is communicated to their EU customers.

One-Stop Shops

The EU will be extending the existing, and introducing new, one-stop shops. These are optional schemes that allow businesses to pay EU VAT on sales to customers in any EU member state on a single return. This avoids having to register and submit returns in a number of EU member states. Once registered for a scheme the VAT due on all eligible supplies within the scope of that scheme must be returned under the scheme.

The One-Stop shops are a payment system only, they do not allow VAT on any costs incurred in the EU to be reclaimed.

Import One-Stop Shop (IOSS)

This portal allows non-EU business who send goods to consumers in the EU to report and pay local VAT. Businesses who have signed up for the IOSS will have to charge VAT on sales at the rate applicable in the customers country. An IOSS return is submitted and the EU VAT is paid on a monthly basis.

The IOSS allows goods to be cleared quickly through customs and gives the customer certainty over the price they pay. This could provide a significantly improved customer experience avoiding unexpected VAT payments before goods are delivered.

The IOSS can however only be used for consignments which do not exceed €150, this is the value above which duty is payable. For consignments over this value VAT on the import will have to be paid on the individual consignment when the goods arrive in the EU.

Non-EU businesses must appoint an EU-based intermediary to use the IOSS unless they are established in a country with which the EU has a VAT mutual assistance agreement, The goods also have to be supplied from that country to the EU.

Currently the UK does not have a VAT mutual assistance agreement with the EU so a UK business wishing to use the IOSS system will need to appoint an EU intermediary. Whilst the scheme simplifies administration there will be an added cost, EU intermediaries can be expensive.

One-Stop Shop (OSS)

The new OSS replaces the current MOSS scheme. The MOSS allowed VAT on the sales of telecommunications, broadcasting and electronic services to consumers, located throughout the EU, to be reported on a single quarterly return. From 1 July 2021 the OSS covers all services supplied to EU consumers by non-EU businesses where the place of supply of the services is in the EU, e.g. land related services, transport services and catering.

The OSS can also be used to report and pay the VAT due on sales of goods held in one EU member state which are sold to consumers in another member state. There will be a liability to register for VAT in the member state where the goods are held but the OSS should avoid having to register in
other member states.

Under the OSS there is no need to appoint an intermediary to use the scheme. Some EU countries do however require non-EU businesses to appoint a fiscal representative if they wish to register for “VAT” in that particular country.

Special Arrangements
There is no obligation to use an OSS and there is an alternative optional simplification for the collection of import VAT on goods sold to EU customers on consignments which do not exceed €150.
This measure is designed for postal operators, express carriers and similar shippers of low value goods. Under this scheme the carrier collects the VAT from the EU customer and declares and pays this VAT to the relevant
EU authority monthly.
This system means the carrier will collect VAT from the
customer directly.

Online Marketplaces

From 1 July 2021 online marketplaces and platforms (OMP), such as Amazon, which facilitate supplies of goods in the EU, will become responsible for charging and collecting VAT on behalf of sellers in certain circumstances.

These are:

• sales of goods imported into the EU with a value up
  to €150 and/or
• sales of goods, of any value, to EU consumers when
  the goods are located in the EU and the seller is based
  outside of the EU

In either of these scenarios the online marketplace is responsible for the payment of EU VAT.

While these rules mean the OMP will deal with the EU VAT businesses do need to consider the UK VAT position. Where a GB business is selling goods to a customer outside the UK and is arranging for those goods to be
removed from the UK the sale can be zero-rated in the UK. If so no UK VAT is chargeable.

There are however certain time limits and evidential requirements which must be met for zero-rating to apply. UK businesses do need to be aware of these requirements and ensure they comply with them.

If the contract with an OMP means the GB business is selling the goods to the OMP they may need to charge VAT on this sale.

It is important businesses review their position regarding sales made using an OMP.

If you would like Albert Goodman to review your processes speak to your normal contact at Albert Goodman or e-mail Richard who would be happy to assist.