Some VAT pointers for EU – Import One Stop Shop

eCommerce businesses, like all other businesses, need to keep their overheads as manageable as possible. Rents, wages and shipping costs are some of the most basic considerations to be taken into account when calculating the cost which one’s product or service will be valued at.

Without getting into the thicket or pricing economics, the more overheads there are and the more they cost, producers must choose to make up the shortfall in one of three ways: earn less and forsake growth, make cutbacks in other business areas like worker’s wages or (more often than not when exporting) pass the cost onto the consumer.

At Green Fulfilment, this is exactly the difficult choice facing a lot of our partners in the wake of the news that from the 1st of July 2021, products valued at under €22 will be subject to EU import VAT rules. This is a change from the rules which came into force in January, where VAT was applied to orders valued at over €22. As such, the new VAT rules are the second massive change in just two financial quarters. Since the UK is now considered a third country regarding imports and exports, it is subject to new VAT e-commerce rules which abolish the provision that no import VAT has to be paid for commercial goods of a value up to EUR 22. From 1 July 2021, all commercial goods imported into the EU from a third country or third territory is subject to VAT irrespective of their value.

As stated, all goods will be subject to VAT. However, there are differences in what extra steps must be taken above €150. As of July 1st 2021, all products up to the amount of €150 will be subject to VAT, formal clearance and a customs clearance fee. Items valued over this amount will be subject to VAT, formal clearance, a customs clearance fee AND customs duties.

There are also consequences for not consolidating new export practices into your business. Without adhering to the new regulations, deliveries with Delivery Duties Unpaid (DDU) will end up passing on the cost to the customer. If the customer decides not to pay this, it could lead to delays, returns or poor delivery experiences which all lead to the reputation of your fulfilment partner and your business being tarnished.

Thankfully, the European Commission has taken steps to provide an “Import One-Stop-Shop” or IOSS which seeks to not only streamline the process of sorting out VAT in an electronic format, but do so without passing the cost onto the buyer. According to the Commission, IOSS was created to facilitate and simplify the declaration and payment of VAT for goods sold from a distance by sellers from either the EU or from a non-EU country or territory. Furthermore, VAT payment is applicable only to purchases made by a buyer within the EU and for goods valued at less than EUR 150.

The electronic interface that makes up the IOSS will become second nature to our partners as Green Fulfilment stands ready to provide helpful, accessible advice to partners who want to ship their quality products to the EU. We do not want to see SMEs in the UK have to choose between disregarding the European Market or having to choose a less green, but more accessible fulfilment partner. As such, we want to make Green Fulfilment as transparent and open to questions as possible when it comes to EU import regulations. While there are trials ongoing for other systems like more streamlined marketplaces from which to sell products, or simply paying Postal Delivery Duties, these are not guaranteed to be socially, economically, or environmentally sustainable. At Green Fulfilment, we believe paperless is the way to go and aligning directly with the market of import, the EU, is more efficient.

20% VAT is not a small amount, particularly to new businesses looking for their first big break in the European market. Our priority will be making sure that information on the IOSS is accessible to our partners and they can concentrate on developing their products and services.

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