SME eCommerce sellers hit by EU VAT changes – how will this effect trading with the BLOC ?

About 26,000 eCommerce sellers will have to register for VAT for the first time, under the EU’s new “one-stop shop” system and face £180m in additional red tape costs.

On 1st July 2021, the European Union is introducing sweeping reforms to the VAT obligations for B2C e-commerce sellers and marketplaces.

1. Launching the One-Stop-Shop EU VAT return

2. Ending low-value import VAT exemption and new IOSS return

3. Making marketplaces deemed supplier VAT

The UK implemented VAT marketplace liabilities reforms from 1st January 2021, while the EU package was delayed to this July.

The changes also seek to tackle the €5 billion eCommerce VAT fraud gap, by co-opting online marketplaces into collecting VAT in place of sellers.

UK exporters using e-selling platforms will now have three options when trading into the EU: register for VAT in the country where they sold most of their goods, which the European Commission estimates will cost €8,000; subcontract VAT to selling platforms such as Amazon or eBay; or ask the postal service to handle VAT.

1. A single EU VAT return for eCommerce distance selling

The existing ‘Distance Selling Thresholds’ simplifications will be withdrawn and replaced by a single EU VAT return, One Stop Shop (‘OSS’). Sellers shipping goods from their home country to customers across the EU may opt to use OSS to report all their pan-EU sales. This is an extension of the 2015 Mini One-Stop-Shop (‘MOSS’), which successfully trialled a single EU return for B2C sales of digital, telecoms and broadcast services (streaming media, e-books, apps etc.).

2. Closing the import VAT exemption loophole – IOSS return 

From July 2021, the €22 VAT exemption on small parcels being imported into the EU for delivery to consumers will be withdrawn. This exemption has been heavily abused by many sellers mistakenly or deliberately under-declaring the import values of goods to avoid VAT. Instead, VAT must be charged at the point-of-sale for consignments not exceeding €150. This VAT may be declared and paid via a new submission, the ‘Import One Stop Shop’ (IOSS) which will create a more efficient fast-track, or ‘Green Channel’, quick and easy customs clearance.

3. Marketplaces become the deemed supplier and VAT collector

The July 2021 reforms will oblige marketplaces which facilitate cross-border sales to consumers via third parties to become the ‘deemed supplier’ in certain cases. This is also termed the full liability regime. This marketplace VAT liability does extend to product liability.

About 26,000 eCommerce sellers, slightly more than 10% of the UK sector, will have to register for VAT for the first time under the EU’s new “one-stop shop” system, which consultants estimate will cost around €8,000 a year each, or roughly €208m (£180m) in total.

The key will be ensuring the software is there to enable VAT payments at the point of sale, subcontract VAT to selling platforms such as Amazon or eBay, or ask the postal service to handle VAT.

With platforms typically charging 30% of gross prices for their VAT services, companies doing more than 150 transactions a year, which includes most of those doing business in the EU, might be advised to register themselves in the bloc, as the import one-stop shop (IOSS) approach could simplify life for smaller exporters.

Metro continue to monitor the evolving UK/EU customs regime situation, to offer advice and tailored customs brokerage solutions through our CuDoS platform.

While we do not anticipate that any of our customers will be affected by these changes, the whole area of VAT liability and compliance can be a ‘minefield’, which is why our specialist broker team can provide advice and guidance on your situation, to ensure that the most appropriate solution is in place for your trading and business.

For further information please contact Elliot Carlile or Grant Liddell to organise a full review and discussion relating to current issues that you may be facing.