Sell via E-Commerce to the EU? Distance Selling, VAT Rules and Collection are Changing Next Year.
2021 is just around the corner which also means new regulations for UK businesses when shipping to EU. A quick overview of what is changing regarding Distance Selling, VAT and Customs Clearance & Delivery for E-Commerce Parcel Exports can be found below.
Distance Selling is Changing
Distance selling refers to EU B2C sales, where there is no face to face contact and the consumer in this relationship is considered to be a non-taxable private customer (Not VAT registered).
Previous rules for distance selling are changing. At present distance selling rules vary across EU countries. For example, Germany requires businesses to apply for VAT registration after 100,000 euro per annum sales in the country. Whereas for businesses in Romania it is just 26,135 euro per annum. The UK continues to adhere to the Consumer Contract Regulations (2014) for distance sales.
IOSS (Import One Stop Shop) is an EU initiative that takes effect from July 2021. The new initiative reduces the distance selling requirement to 10,000 euro across ALL member states. That means VAT will be needed to be collected by member states if your sales are over this figure. The IOSS will reduce confusion and potential breaking of regulations for sellers, as they will not have to adhere to different quotas, however the ceiling for non-VAT registered sales is significantly reduced.
IOSS plans to be a service which collects VAT at the point of sale with the IOSS number being included on the consignment in place of a VAT number. This will allow traders to receive a VAT exemption upon import into EU, if the trader declares and pays VAT at time of sale using IOSS. This shifts liability to the marketplaces for receiving VAT.
IOSS will remit VAT across member states which removes the requirement for VAT registration across different member countries. That means you will only have to apply for IOSS in one EU member state.
NB: IOSS is for B2C companies. It is unclear if a B2B facilitation will be in place.
How will VAT be charged post transition period?
From 1st Jan 2021 – 1st July 2021:
Goods sent from the UK to EU consumers can be Zero rated for UK VAT as exports, but will be subject to import VAT on arrival in the EU member state.
From 1st Jan 2021, there will be rules for EU import duty & VAT.
EUR 0-22 – Zero Import VAT and Duty
EUR 22-150 – Import VAT applied at the domestic rate of the country where the parcel cross the border.
From 1st July 2021:
VAT will be due on all goods (including EUR 0-22 parcels)
Two methods of customs clearance & delivery for e-commerce parcel exports:
1. Postal Clearance and Delivery or commercial.
2. Express clearance and delivery for e-commerce parcel exports.
Postal Clearance requires CN22 or CN23 declarations + EDI data (a new 2021 requirement).
Commercial / express clearance requires detailed commercial invoices + EDI data.