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, including those based within the EU and those based outside that are selling to customers 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 within 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?
From July 1, 2021, VAT is now 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).
ATTENTION! Due to the delay in the process of implementing the EU VAT changes in the into Czech Republic, consignments with a value of up to €22 will continue to be exempt from VAT at the time of import by the Czech authorities. This could potentially lead to delays in the process of handling these consignments or to requests from our customs experts to complete the missing data for your consignments. We will continue to monitor the situation and keep our customers updated. Providing the best customer experience possible is a top priority for us, and we are working closely with the relevant authorities to ensure a smooth transition to the new process as swiftly as possible.
How might it affect my business?
EU businesses selling goods from within the EU Member States are not impacted by the removal of the €22 low-value threshold. However, EU businesses selling goods that are imported into the EU can no longer import consignments valued under €22 free of VAT.
How might it work in practice?
Scenario
An online business in Germany sells one pair of socks worth €10 to an EU consumer that is also based in Germany. This pair of socks is shipped to the consumer from China.
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.
EU businesses that sell goods to EU consumers that are dispatched from outside of the EU - in consignments up to €150 - are able to use the optional IOSS. This allows sellers 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.
To benefit from this, from July 1, 2021, you will need to register for the IOSS in an EU Member State and include your IOSS number when you book your shipment via the online booking tool for eligible B2C e-commerce shipments. These will be shipments dispatched from outside of the EU sent directly to consumers in the EU, that are valued up to €150 (and not subject to excise duty).
FedEx/TNT will then provide this number to customs via the customs declaration.
If you sell goods (dispatched from outside EU) via a marketplace and the marketplace has opted for the IOSS, you must use the marketplace’s IOSS number and provide it to the party responsible for making the customs declaration (FedEx).
If you use one of our automated shipping platforms, you can enter your IOSS number when you book your shipment. Please note it is just the 12 digit IOSS number that we require, do not add the words ‘IOSS’. The details of how to do this depend on the platform you are using, as follows:
| If you use Modernized FedEx Ship ManagerTM at fedex.com or myTNT 2, 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 myTNT 2 – to use the IOSS.
If the IOSS number is not added at the moment of booking following the instructions provided, and the shipper uses a different non-standard method to communicate the IOSS number, FedEx cannot guarantee it will be used. In this case the receiving customer might be charged for VAT.
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.
If you would like to know more about the IOSS, please see the European Commission website.
2. Introduction of a One-Stop Shop (OSS)
What does it mean?
Businesses no longer have to register for VAT in every EU country they sell in if they sign up to the OSS. But along with the introduction of the OSS, the EU has removed the distance selling VAT thresholds regime. This means that businesses have to charge the VAT rate of the customer’s EU country of residence from their first sale, rather than once a certain threshold has been reached.
How might it affect my business?
Instead of registering for VAT in multiple EU countries, businesses have the option to complete a quarterly OSS filing listing all their eligible intra-EU sales to consumers. The VAT would be paid to their home tax authority, which would then forward it to the appropriate countries.
This could reduce complexity and cross-border VAT compliance costs for online sellers, and potentially facilitate greater cross-border trade.
As an exception to the general rule, EU-businesses established in one EU Member State selling less than €10.000,00 per annum cross-border (B2C sales of goods and certain services) can charge their domestic VAT rate and report the sales in their domestic VAT return.
How might it work in practice?
Scenario
A French e-commerce business sells electronics to customers in five other EU countries where the value of sales exceeds €10.000,00.
Before July 1, 2021
The business is obliged to register and account for VAT in each EU country and charge customers their domestic VAT rate if sales in the country are above a certain local annual turnover threshold.
After July 1, 2021
The business can choose to close its foreign VAT registrations and file eligible intra-EU sales to consumers through one OSS VAT return in its EU country of registration. It would need to charge VAT at the customer’s domestic VAT rate regardless of the total amount of sales in that country.
To sign up for the One-Stop Shop (OSS), businesses should register on the OSS portal of their EU Member State from April 1, 2021.
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 the businesses selling through them, are now responsible for collecting, reporting and remitting the VAT due. The VAT collection by marketplaces apply to the following transactions:
- B2C imports of consignments with a value of €150 or below into the EU (where the marketplace has opted-in for IOSS).
- Intra-EU and domestic sales of goods by sellers located outside the EU to consumers within the EU.
How might it affect my business?
For B2C imports of consignments with a value of €150, where the 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.
Non-EU businesses using online marketplaces for intra-EU and domestic sales of goods to consumers within the EU might be able to de-register for VAT in EU Member States, since it is the marketplace that is deemed to be the supplier of the goods and therefore responsible for collecting the VAT. This could reduce the administrative burden for non-EU sellers.
How might it work in practice?
Scenario
A non-EU based e-commerce business sells a €90 vase to an EU customer from its warehouse in the EU, via a qualifying online marketplace.
Before July 1, 2021
The non-EU business selling the vase is responsible for charging the customer VAT and remitting it to the authorities.
After July 1, 2021
The marketplace the vase is being sold through is responsible for collecting the VAT from the customer and ensuring it is passed to the relevant authorities.
*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.
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