Important EU VAT changes for online sales
Complying with EU VAT changes from 1 July
What is the Import One Stop Shop (IOSS)?
E-commerce businesses trading to customers (B2C) in the European Union (EU) will see new VAT rules due to be introduced from 1 July 2021.
On 1st January 2021, the sale of goods from UK businesses to customers in the EU were no longer subject to the distance selling threshold and VAT had to be paid from first sale. This led to businesses either having to register for VAT in every EU country they sold in or make the customer the importer.
Due to the significant burden posed by completing foreign VAT registrations and returns for most small businesses, many chose to transfer the VAT responsibilities to the customer. This has led to unexpected VAT and other additional costs becoming payable by the customer on collection of consignments above the low value import VAT threshold of EUR 22, affecting their experience and contributing to a reduction in sales for some businesses.
After 1 July 2021, the EURO 22 low consignment exemption is being removed, which means that import VAT will now be chargeable on every consignment imported to the EU from a third country from the first EURO.
To help combat negative customer experience and encourage the growth of online sales, the Import One Stop Shop (IOSS) is being introduced by HMRC from 1 July 2021.
What is IOSS?
The IOSS is a way of accounting for VAT via an electronic portal that simplifies the declaration and payment of VAT on distance sales of imported goods to the EU.
As the ‘One Stop Shop’ name suggests, if an eligible seller chooses to register for and use IOSS, they will be allowed to register in one EU country and submit VAT for all 27 EU tax authorities on one simple return for consignments not exceeding £135 (EUR 150).
With VAT being charged and collected by the seller at point of sale, IOSS makes the buying process much simpler for the customer, with the same seamless delivery of goods they have previously been used to.
We recommend that you obtain professional advice regarding the changes to EU VAT and clarify the implications for your business as soon as possible. Chamber International can also help if you are importing or exporting items, visit www.chamber-international.com.
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