EU 2021 VAT changes for Ecommerce Businesses

 

The 27 EU member states will make changes to their value-added taxes (VAT) obligations on July 1, 2021. These changes will impact businesses that export goods to EU countries (known as distance-selling) and businesses that import goods from non-EU countries that are then delivered to EU customers. The rules for business-to-consumer services have also been updated.

These changes are intended to make tax filing easier for merchants selling within the EU and to the EU. They also aim to help EU businesses compete on an equal basis with non-EU businesses that may not charge VAT. This article gives an overview of changes that are coming to EU and non-EU merchants who sell to EU shoppers.

1. 1.

These changes apply to merchants who have stock in the EU and sell cross-border between EU countries (e.g. selling goods in France to a German shopper). These changes apply to:

  • 1.1 Withdrawal from distance selling thresholds
  • 1.2 The introduction of One Stop Shop (OSS), filing
  • 1.3 EU-wide threshold introduced for micro-businesses

1.1 Withdrawal from distance selling thresholds

The EU distance selling thresholds will remain unchanged until 30 June 2021.

  • EUR100,000. An annum: Germany, the Netherlands, Luxembourg and Northern Ireland.
  • It is EUR35,000/annum for other EU countries or the local currency equivalent

The EU distance selling thresholds are being replaced by a threshold for EU-wide selling of distance sales of EUR10,000 starting 1 July 2021. If they sell intra-EU cross border, merchants will have to charge VAT from the first sale, if their total cross-border EU sales exceed EUR10,000. Except for exemptions, merchants must report such sales to the relevant foreign tax authority.

The EU has introduced One Stop Shop (OSS), which will help with the above changes. It provides a new method to file VAT returns for ecommerce merchants involved in intra-EU cross border sales (see section 1.2).

1.2 The introduction of One Stop Shop (OSS), filing

Merchants within the EU will now be able file a simplified EU VAT tax return called the One Stop Shop (OSS) from 1 July 2021. This allows them to report their intra-EU cross border sales to multiple EU countries. Merchants don't need to register for VAT in EU countries included in their OSS filing. As long as they are not from their home EU country, or an EU country in which they have a physical address or inventory, merchants are fine.

Merchants will need to file an electronic OSS submission using their national OSS portal every quarter. They also have to keep a record for at least 10 year all sales.

Merchants who have a physical presence in the EU or hold inventory (e.g. in a warehouse) may need to register for VAT and file a return on their VAT in each country.

OSS reduces the time and effort required to register for VAT in all EU countries where intra-EU cross border sales take place. It also simplifies tax filing by consolidating all intra-EU sales into one OSS filing.

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1.3 EU-wide threshold introduced for micro-businesses

An exemption will be granted to merchants who have less than EUR10,000 annually in intra-EU cross border sales of B2C goods or services. Eligible merchants will instead be permitted to charge their domestic TVA rate and report sales below the threshold in their domestic VAT returns.

2. 2.

These changes apply to non-EU merchants who sell cross-border from non-EU countries to EU countries (for example, selling goods in Australia to a shopper from Italy). These changes relate to:

  • 2.1 Withdrawal from VAT exemption threshold for low value consignment imports
  • 2.2 A new EUR150 VAT limit for imports in order to use simplified filing
  • 2.3 Import One Stop Shop filing

2.1 Withdrawal from VAT exemption threshold for low value consignment imports

The current VAT exemption for low-value goods (up to EUR22) imported to be delivered to EU shoppers will be removed as of 1 July 2021. Merchants who are currently exempted from VAT will have to learn about and prepare for new schemes starting in July 2021 (see section 2.2.2).

2.2 A new EUR150 VAT limit for imports in order to use simplified filing

An optional simplified VAT regime can be used to pay VAT for goods imported into the EU starting 1 July 2021. The consignment must have an intrinsic value of not more than EUR150. Goods are imported from non EU countries and delivered to EU shoppers.

The EUR150 intrinsic price is the total cost of the goods, excluding any VAT, transport or insurance costs, if they are separately itemized, as well as any other taxes and charges. Merchants are still required to collect VAT on transport/insurance costs separately if the intrinsic value is less than EUR150. Take, for example:

The invoice shows the price of the goods at EUR140

Transport charges, as shown in the invoice: EUR20

VAT (20%), as indicated on the invoice: EUR32

Total invoice amount: EUR192

The following options are available to merchants who have consignments that meet the above criteria:

  • 2.2.1 Collect equivalent import VAT at point of sale and report and pay the EU VAT collected monthly through the IOSS filing
  • 2.2.2 The merchant pays the import VAT (Delivery Duty Payed)
  • 2.2.3 The import VAT or DDU is paid by the buyer (Delivery Duty Not Paid)

2.2.1 At point-of-sale, collect equivalent import VAT and report to the EU the VAT collected on a monthly basis

The EU has introduced the Import On Stop Shop filing (IOSS) to assist ecommerce merchants who choose this approach. This is a new way for merchants to file VAT returns when they cross-border sell from non-EU countries to EU (see section 2.2.3).

2.2.2 The merchant pays the import VAT (Delivery Duty Payed)

Merchants who choose to pay import VAT at the point of import (also known as DDP) can work with their shipping company to have the shipping company bill for the import TVA on a per-shipment basis.

This streamlines the sales process, and reduces any unexpected costs for the customer. BigCommerce has partnered with several cross-border solutions, such as Zonos and Global-E.

2.2.3 The import VAT or DDU is paid by the buyer (Delivery Duty Not Paid)

Merchants may also allow the shopper pay the import VAT at the point of import. This is also known by DDU (Delivery Duty Undone). The import VAT will be paid first by the shipping agent or customs agent for the shopper. After payment, they will bill the customer and release the goods.

If the shopper refuses payment, the goods can be returned to merchant. The merchant may then be liable for any import charges and return shipping fees.

Separately, VAT will be charged to merchants who use an OMP (Online Marketplace Platform) or platform. BigCommerce is not an OMP (Online Marketplace Platform) or platform that facilitates sales.

Note - Both import VAT and import duties will continue to be applicable to all consignments to EU countries that exceed the EUR150 threshold.

2.3 Import One Stop Shop filing

Merchants who choose to charge VAT at the point of sale for consignments exceeding EUR150 that are imported from non-EU nations to EU shoppers will be able file an EU VAT return through the Import One Stop Shop. Merchants need only register in one EU country to receive an IOSS number. This number should be noted on all parcels sent to EU countries. This will inform customs authorities and facilitate customs clearance.

IOSS is a monthly submission to a tax authority in one EU country. It will then declare all EU import VAT due. It is especially useful for merchants whose shoppers are in other EU countries, and where the merchant wishes to pay import VAT on behalf the shopper.

Consignments with an intrinsic value less than EUR150 are exempt from IOSS. Instead, merchants can work with their shipping company to pay import VAT on their behalf and be billed by them. Or they can pass it onto the shoppers (see sections 2.2.2 & 2.2.3).

Not all merchants from EU may be required to appoint an Intermediary VAT to act in the same way as a Fiscal Representative to assist with their EU VAT registration under IOSS. Learn more here.

Most Frequently Asked Questions

1. How do I register for OSS / IOSS

Every EU country will have an online OSS portal that allows you to register. The single registration will apply to all sales to consumers in EU member states that merchants do not have a physical address or stock inventory. Non-EU merchants who wish to register for IOSS will most likely have to apply through an intermediary.

2. Which EU country should I apply for OSS / IOSS registration?

EU merchants must register in their country of establishment in order to be OSS registered. Non-EU merchants need to register in the EU countries where they have stock. The merchant can choose to register in the EU country they wish to register if there are multiple locations. Non-EU merchants can choose which country they want to register for IOSS registration, but they will likely need to appoint an intermediary.

3. What are the benefits of registering as an EU merchant for OSS?

OSS simplifies the filing process, saves merchants time and compliance cost when registering for VAT in multiple EU states where they sell to customers.

4. 4. Does the EUR150 import VAT threshold include tax or not?

The EUR150 threshold excludes tax and the value of the consignment. This threshold can be used to exclude separately itemized shipping costs and transport costs, but these must still be added VAT.

5. I don't know how the EU VAT changes will affect my business. For more information, where can I go?

For more information, contact a tax professional or lawyer if you are unsure about how these changes will affect your business.

6. BigCommerce is a marketplace or facilitator?

BigCommerce is not an OMP/platform that facilitates OMPs.

7. How does Bigcommerce support Northern Ireland sales tax calculations?

BigCommerce, in partnership with Avalara will send a country code "XI" to AvaTax when AvaTax becomes the enabled tax provider. This is to ensure that AvaTax returns the most accurate sales tax estimates.

8. BigCommerce has solutions that could help with these changes.

Avalara AvaTax assists with VAT registration, collection of equivalent import VAT at the point-of-sale, and reporting on VAT returns.

Global-E and Zonos are able to assist with import VAT collection (DDP).

Passport, an international shipping company, partners with direct-to consumer brands and ecommerce merchants in order to create international shipping solutions that address the digital and logistical challenges of cross-border shipping.

ShipStation also offers assistance with international shipments and commercial invoices.

9. 9. What happens if Manual Tax is enabled on BigCommerce

If manual tax is enabled, you won't be able to collect equivalent import VAT at the point-of-sale for consignments not exceeding EUR150. DDP (section 2.0.2) or DDU (section 2.2.3) are better options.

10. How can I personalize my BigCommerce invoices

BigCommerce offers four types of editable invoices: email invoice, merchant printable invoice, shopper printable invoice, and detailed customer printable bill. Learn more about how you can customize them.

Additional Information

  • European Commission: Modernising VAT for cross-border e-commerce
  • European Commission: Everything you need to know regarding the One-Stop Shop (OSS).
  • European Commission: Everything you need to know regarding the Import One Stop Shop (IOSS).
  • EU July 2021 ecommerce VAT package
  • 2021 Guide: EU VAT Reboot
  • Understanding the UK Value-Add tax: How to Prepare for Brexit in an Ecommerce Company

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