Goods from outside of the EU sent to a consumer in the EU
Do you have a business and do you sell and ship goods from a non-EU country to consumers in the European Union (EU)? Then pay close attention! As of 1 July 2021, a lot will change in the EU. New VAT rules will come into force, causing additional obligations for your business. However, aside from obligations, these new rules may also offer opportunities. The whole EU is within your reach! Beware! The country in which your business is established, is not relevant for these rules. These rules apply to businesses established in the EU, but also to businesses established in a non-EU country.
In the below we will discuss the VAT consequences in cases where goods are sold directly to the consumer, by you as supplier. However, if you (also) sell goods to consumers through a platform (marketplace), other consequences will ensue.
What is relevant for you, if you are a supplier?
Import threshold abolished
Up to 1 July 2021, the import of low-value consignments (up to € 23) is exempt from VAT. This exemption will however be abolished. Every import into the EU will be VAT taxed, regardless of the value of the goods. This means that you, as a business, will be liable for VAT on these sales to consumers in the EU.
To make reporting and paying the VAT due on consignments with a value not exceeding € 150 simpler, special schemes will be introduced.
Special scheme for your business: IOSS
The first special scheme is the so-called IOSS, which stands for Import One Stop Shop.
Which consignments can the IOSS be applied to?
- Goods that are sold to a consumer;
- If a package from a non-EU country is shipped to the EU;
- If the value of the consignment does not exceed € 150; and,
- If it does not concern excise goods
*The threshold amount of € 150 concerns the value of the consignment excluding VAT. If the transportation costs are not mentioned separately and are included in the price, this total price is taken into account.
Who can apply the IOSS?
- Businesses established in the EU
- Businesses established in a non-EU country (only possible if an intermediary is appointed)
- Platforms (marketplaces), established in the EU, which facilitate the above mentioned sales to consumers
- Platforms (marketplaces), established in a non-EU country, which facilitate the above mentioned sales to consumers (only possible if an intermediary is appointed)
What are the VAT consequences of using the IOSS?
If you are a supplier, you must charge VAT on the sale directly to the consumer. The VAT rate of the EU country to which you ship the goods, applies. This VAT is due in the month that you receive payment from your customer.
Next, you ship the goods to the consumer. If you provide, upon import, your valid IOSS VAT identification number to the party who is responsible for clearance of the goods in the EU, the import of the goods in that EU country is exempt from VAT.
You pay the VAT due, on the sale to the consumer, every month using the special IOSS VAT return. If you are not established in the EU and therefore make use of an intermediary for the application of the IOSS, the intermediary will take care of the IOSS VAT returns and file them for you.
What are the advantages of the IOSS for your business?
There are a number of advantages to using the IOSS. For example, it is clear to the consumer at the moment of the sale, what price they owe you, namely the price including the VAT due. The consumer is therefore not faced with additional costs such as VAT, afterwards.
Also, the use of the IOSS is meant to ensure swifter clearance of goods upon import, which means the goods reach your customers sooner. This is very good from a commercial perspective, as consumers in the EU have become accustomed to fast deliveries.
Additionally, you only need to register for IOSS in one EU country and can sell to consumers in the 27 EU member states. You then pay the VAT due in all these EU countries, in the EU country of registration, through the IOSS return.
Not using IOSS
It is of course possible that you haven’t (yet) registered for IOSS. Or that you do not wish to use the IOSS at all. Using IOSS is, after all, not mandatory. It is also possible that the value of your consignment exceeds € 150, in which case the IOSS cannot be applied.
If you sell goods to a consumer in the EU, without applying the IOSS, the VAT consequences are different. The import of the goods in the relevant EU country is VAT taxed. The consumer will only receive the goods after that VAT due has been paid. In such a situation, it is important to determine in whose name the goods will be imported into that particular EU country.
Are you the supplier and are the goods imported in your name? If so, bear in mind that the import is VAT taxed, and the sale after import is also VAT taxed. The VAT consequences of this sale depend on the flow of goods.
Are the goods imported in the name of the consumer, and are all costs charged to the consumer? In that case, the consumer is faced with additional costs. The consumer must pay import VAT and, possibly, additional costs of the party that takes care of the clearance of the goods. In such cases, the consumer may decide not to accept the package, as additional costs are charged. Consumers in the EU are, after all, used to prices including VAT.
You may also choose to import the goods in the name of the consumer , and have the costs charged to you as supplier. In that case, the consumer is not faced with additional costs.
What must you, as the supplier, do?
- Analyse your flow of goods
- Determine the VAT consequences
- Determine which scheme you want to use, and whether you can do so
- Do you want to use IOSS? If so, register for IOSS, if needed through an intermediary;
- Adjust your website and underlying systems and make sure you charge the VAT of the EU country of destination
- Make a clear distinction between consignments to which the IOSS applies (value not exceeding € 150) and consignments to which the IOSS does not apply (value over € 150)
- Provide your IOSS VAT identification number only to parties that take care of your customs formalities
- If you are established in the EU: prepare your IOSS returns on time, file them on time and pay the VAT due, to the authorities of the EU country of registration
- If you are established outside of the EU: keep an eye on whether your intermediary prepares and files your IOSS VAT returns on time, and make sure you pay the VAT due, to the authorities in the EU country of registration
- Do you not wish to make use of IOSS, have you not applied the IOSS, or does the value of the consignment exceed € 150?
- Determine in whose name the goods are imported into the EU country of destination, and who bears the costs
- Adjust your website, and make sure it is clear from your website what additional costs a client may expect.
These new rules may certainly work to your advantage, so that you can pursue new opportunities. It is however important that you start preparing on time. And not just within your organisation: all parties involved in your supply chain should know what your plans are, and what you expect of them.