Changes to European Union (EU) VAT Rules
The European Union (EU) is making some important changes to its Value-Added Tax (VAT) rules, which will come into effect July 1, 2021. These rules apply to any shipment of goods going into the EU. While these reforms primarily target business-to-consumer (B2C) e-commerce imports, impacting both businesses and online shoppers, they may also impact business-to-business (B2B) imports.
The good news is that these changes could lead to simpler procedures and reduced administration. If you ship goods into the EU, we recommend that you read the changes taking place (below) and begin preparing your business now.
There are three (3) changes to the VAT rules that may impact your business:
- Removal of the EUR 22 import VAT exemption
The VAT exemption currently in place for goods imported into the EU with a value up to EUR 22 will be removed; meaning that these shipments will now be subject to VAT. These low value goods will therefore also require formal customs clearance, although most goods valued up to EUR 150 remain exempt from customs duties.
What does this mean for you? If your business is based outside the EU, it will no longer be able to export shipments valued under EUR 22 to consumers in the EU free of VAT.
2. Launch of the Import One-Stop Shop (IOSS) Platform
This optional platform only requires you to register with a single EU Member State to manage your sales VAT throughout the EU, removing the need to register for VAT in every country you are selling goods to. Click here for more information on the IOSS platform and process.
If you are a non-EU based supplier or marketplace selling goods to consumers in the EU, registering with the IOSS means you can collect accurate VAT for the purchase from the consumer at the point of sale, which can then be declared and paid in a periodic VAT return.
Shipments containing a valid IOSS number will therefore not be subject to import VAT, which may help them move through customs quicker. If your company does not have an EU-based establishment and you wish to register for the IOSS, you will need to appoint an intermediary to settle VAT through this platform.
Registering for the IOSS platform is not obligatory and you can continue to declare and pay VAT on EU imports as you do today.
3. For Consignments above EUR 150
The EU VAT reform only impacts goods sold up to a value of EUR 150. For goods valued above this threshold 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.
Here is a useful checklist to prepare your business for these changes:
- Identify which areas of your business are impacted by the new EU VAT rules.
- Assess your VAT accounting needs for the EU.
- Consider registering for the IOSS platform if you want to use a single registration to pay VAT throughout the EU for B2C shipments up to EUR 150.
- If you register for IOSS, appoint an intermediary to handle tax compliance on your behalf in the EU in case you do not have an EU-based establishment.
- Review and potentially cancel existing foreign EU VAT registrations if you wish to replace these with a single IOSS registration where applicable.
- If you choose not to register for the IOSS platform, ensure you have a valid account to charge import fees to.
- If you are selling through an online marketplace, contact them to understand who will be responsible for VAT accounting for your B2C shipments up to EUR 150.
- If you choose to pass on import charges to your consignee, please inform them upfront that import fees will be due for their shipment.
You can visit the courier resources for more detailed information on VAT rules:
- FedEx – Changes to European Union Value-Added Tax (EU VAT) Rules | FedEx Canada
- UPS – International Shipping Help and Advice | UPS – Canada
- DHL – https://www.dhl-eucustoms.com/eu-vat-de-minimus.html