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End of the low-value import VAT exemption loophole and new IOSS return

EU and non-EU sellers selling goods online to EU consumers can currently import the goods into the EU, directly to the consumer, free of import VAT if the consignment of goods is valued at EUR22 or less.

The exemption is being removed as of 1 July 2021 and all imports will be subject to EU VAT.

Switching import VAT to point of sale

The EUR22 exemption has been abused by sellers mistakenly or deliberately under declaring the import values of goods in order to avoid VAT.

The EU has decided to scrap the import VAT exempt threshold and instead, from 1 July 2021 it will require EU and non-EU sellers to charge VAT at the point of sale for consignments of EUR150 or below.

Sellers will charge VAT at the rate of their customer’s EU country of residence at the point of sale on the website. No VAT will be due at the point of import.

Import One-Stop-Shop (IOSS)

To report the VAT charged at the point of sale, a new declaration, IOSS, is being introduced which will report distance selling across EU borders of imported consignments below EUR150.

Sellers or deemed supplier marketplaces, must register for IOSS in one EU state.  They will be issued a unique IOSS identification number which should be listed on all packages sent to the EU. This will demonstrate to customs that VAT is being properly declared and should create a more efficient ‘green channel’, with quick and easy customs clearance.

IOSS will be a quarterly filing submitted to a tax authority in one nominated EU member state and will declare import VAT due in all EU countries. The format and due dates will be the same as the VAT OSS.  Sellers will make a single payment of the VAT due to the country where they are IOSS registered.

Simplified customs declaration

To help both importers and customs authorities cope with the enormous volume of low-value consignments, the standard customs declaration for goods not exceeding €150 is being condensed.  From July 2021, sellers will be able to provide a simplified declaration at the point of import into the EU.  This is a ‘super-reduced dataset’ for the party declaring the import and it requires 3 times less data than a standard declaration.

What about British resident sellers selling to EU consumers?

For sales to EU consumers, British resident sellers are now non-EU residents. From July 2021, they will be able to use the EU IOSS as non-Union sellers. They will be required to register in any one EU state for the quarterly IOSS filing and VAT payments.

What are the implications?

The abolition of the EUR22 exemption from July 2021, means that EU sellers will no longer be disadvantaged on price, as non-EU sellers will have to charge VAT on all imported goods.

Under the ‘non-Union scheme’, non-EU sellers will have to register for IOSS in just one EU state to declare the VAT on any affected imports on shipments below €150.

If any seller chooses not to use the IOSS, the customer will have to pay the delivery or customs agent to access their goods.

If you would like any advice, please email enquiries@cowgills.co.uk and one of the team will be in touch.

Disclaimer

The information was correct at time of publishing but may now be out of date.

Tax
Posted by Carolyn Van Hecke
19th May, 2021
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