Changes to EU VAT rules
Changes to EU VAT rules
The European Union has made some important changes to its VAT rules, which came into effect on July 1, 2021
The European Union has made some important changes to its VAT rules, which came into effect on July 1, 2021
The European Union has made some important changes to its VAT rules, which came into effect on July 1, 2021
Which businesses do these changes affect?
All businesses are affected, but the changes mainly affect business-to-consumer (B2C) sales and online marketplaces based outside of the EU, as well as EU-based businesses selling to consumers in the EU.*
These changes could lead to simpler procedures and reduced administration. There could also be broader implications for the way you conduct business into the EU.
The three biggest changes are:
The UK has already introduced changes to its VAT rules in January 2021, following its departure from the EU. For more information on these changes, please download our overview guide.
1. Removal of the €22 import VAT exemption
What does it mean?
Effective July 1, 2021 VAT is charged on all commercial goods imported into the EU, regardless of value. For consignments with a value of €150 or below, this can either be charged at the time of the sale by using the new Import One-Stop Shop (IOSS), or be collected from the end-customer by the customs declarant (FedEx).
How might it affect my business?
If your business is based outside the EU, your customers are no longer able to import shipments valued under €22 into the EU free of VAT.
How might it work in practice?
Scenario
An online business in China sells one pair of socks worth €10 to an EU-based consumer.
Before July 1, 2021
The shipment can be imported into the EU free of VAT, since the total value of the goods is less than €22.
After July 1, 2021
All shipments attract VAT regardless of value. VAT applies at the rate set in the buyer’s country of residence.
2. Introduction of an Import One-Stop Shop (IOSS)
What does it mean?
For e-commerce consignments of €150 or below, the EU has introduced an optional Import One-Stop Shop (IOSS) to clear goods through customs. This allows sellers or online marketplaces to charge VAT at the point of sale and remit it directly to the authorities. This can make the process simpler and more transparent for the consumer, and helps to ensure efficient customs procedures.
If the IOSS is not used, FedEx will collect the VAT from the customer prior to delivery and pay it to the authorities.
How might it affect my business?
To sign up to the IOSS, most non-EU sellers will have to appoint an intermediary to register and declare the VAT on their behalf, unless they are established in the EU themselves. They will then need to provide their IOSS number to the customs declarant (FedEx).
VAT for their B2C sales imported into the EU is submitted via a monthly tax return in the nominated EU member state, which will then forward the VAT declaration and payment to the tax authorities in the EU destination countries. As a consequence, businesses no longer have to register for VAT in every EU country they sell in.
How might it work in practice?
Scenario
A U.S. e-commerce business sells electronics with a value of less than €150 to customers in five EU countries.
Before July 1, 2021
The U.S. e-commerce business is obliged to register and account for VAT in each EU country.
After July 1, 2021
The U.S. e-commerce business can choose to close its foreign VAT registrations and register for IOSS in one EU country, charging VAT at the point of supply. Or the business can continue as they do today, with their customers paying VAT on importation.
Your IOSS questions answered:
The IOSS can be used for B2C e-commerce shipments into the EU from non-EU locations, where the consignments are worth €150 or less and aren’t subject to excise duty.
You will need to include your IOSS number when you book your shipment. Only include the 12 characters – do not add the word IOSS or any other characters. Please note: if you include a business name in the recipient’s address, the customs authorities are likely to view the shipment as a B2B shipment (for which the IOSS cannot be used).
The details of where to enter your IOSS number depend on the shipping platform you are using, as follows:
| If you use Modernized FedEx Ship ManagerTM at fedex.com or MyTNT2, enter your IOSS number into the Shipper or Sender Tax ID field. |
| If you use Toolbox, enter your IOSS number in the VAT field. |
| If you use Global Ship Manager software, enter your IOSS number in the VAT/Customs ID/EIN# field. |
| If you use FedEx Web Services, enter your IOSS number in the TIN field. |
| If you use TNT ExpressConnect, enter your IOSS number in the VAT field. |
| If you use our integrated solution to create an EDI TNT NFF data file, enter your IOSS number into the VAT field. |
| If you use a TNT EDI Customised solution to ship, you will need to contact your sales representative who will request that someone from our Customer Technology team contacts you. |
| If you use your own system integrated with one of our standard tools, you may need to adjust the mapping of your data to the relevant field. If required, contact your sales representative who will request that someone from our Customer Technology team contacts you. |
| If you ship via a Third Party Provider, you should contact your provider and they will supply the details for your platform. |
If you are using a shipping solution that isn’t listed above, you will need to move to a compliant platform – such as Modernized FedEx Ship ManagerTM at fedex.com or MyTNT2 – to use the IOSS.
FedEx and TNT can only accept an IOSS number via one of our online automation solutions. You cannot submit manual Air Waybills if you wish to use the IOSS.
For more details on using your IOSS number when you book a shipment with FedEx, read our easy-to-use guide.
Please note, as of July 1, 2021, all shipments / commodities to the EU require a value for customs and a commercial invoice, except “documents”. Please ensure you show the true value of the goods in the “customs value field” on the Air Waybill, excluding freight and other charges.
For B2C shipments making use of the IOSS it is also recommended to include the sales price in euros (€) on the commercial invoice to avoid exchange rate differences at the time of import.
If you want to return goods outside the EU, a new FedEx/TNT AWB will need to be created with a reference to the old AWB included in the description field and clearly marked as a return shipment.
If you do not opt into IOSS, then FedEx will pay the import VAT on your behalf using our own deferment account. This will ensure we can deliver your shipment as quickly as possible. Please note, we will then invoice this amount to the receiver and this incurs an administration fee. This will be a Disbursement fee, which is part of our ancillary charges. Please see our ancillary clearance service fees page to see the charge at destination country.
Please also note that you may register your company directly with the IOSS without using the services of an intermediary, provided that you are established in the EU, or use the services of another intermediary than the one provided by FedEx to fulfil any relevant IOSS obligations.
To sign up for the Import One-Stop Shop (IOSS), businesses should register on the IOSS portal of an EU Member State. Businesses not already established in the EU will normally need to appoint an EU-established intermediary to fulfil the VAT obligations.
3. Certain online marketplaces become the VAT collector
What does it mean?
Marketplaces in scope of the new EU VAT rules can, for instance, be online platforms that facilitate the sales transaction. They enable sellers to sell their goods directly to customers.
Certain marketplaces, rather than their sellers, are now responsible for collecting, reporting and remitting the VAT due from the end-consumer if they register under the IOSS. The IOSS will then apply to B2C imports of consignments up to €150 into the EU, facilitated by the online marketplace.
How might it affect my business?
If a marketplace has opted for the IOSS, businesses selling through it must use the marketplace’s IOSS number and provide it to the party responsible for making the customs declaration (FedEx).
Businesses using several marketplaces to sell their goods should keep clear evidence of the sales carried out via each. They should also provide the corresponding IOSS number for each sale to the customs declarant.
How might it work in practice?
Scenario
An e-commerce business based in China sells a €90 vase to an EU customer, via a qualifying online marketplace that opted for the IOSS.
Before July 1, 2021
The customer buying the vase from the seller is responsible for paying the VAT on their purchase at the time of importation.
After July 1, 2021
The marketplace the vase is being sold through uses the IOSS and is responsible for collecting the VAT from the customer at the time of sale, ensuring it is passed to the relevant authorities.
More details on using the IOSS and the other important changes to the EU’s VAT rules are available from the Publications Office of the European Union.
*EU countries are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.
Please note that, under the terms of the EU-UK Joint Protocol, Northern Ireland remains part of the EU VAT area for goods. This means that these new provisions also apply to goods imported into Northern Ireland from the rest of the world.
The information provided does not, and is not intended to, constitute legal and/or tax advice; instead, this information is for general informational purposes only. This information may not constitute the most up-to-date legal or other information. Readers of this information should contact their own advisor to obtain advice with respect to any particular legal and/or tax matter. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. The content on this posting is provided “as is”; no representations are made that the content is error-free.