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EU VAT changes – Are you ready?

EU VAT changes – Are you ready?

May 27, 2021

On the 1st July 2021 the previous VAT exemption limit of €22 ($26) for the import of goods into the EU will cease to apply. This means that every product that is sold from a non-EU country (e.g. USA, Great Britain, China), will now be liable to import taxes.

The EU wide changes take effect on the 1st July 2021 when the €22 ($26) tax exemption limit will end. This means that every product that you buy in a non-EU country (e.g. USA, Great Britain, China), will now be liable to import duties.

The EU Commission introduced the measures to remove the tax advantage towards non-EU mail order companies and strengthen member states domestic economies and stop VAT fraud.

Taxes are payable for each consignment of goods arriving from a non-EU country if they exceed the amount of €1 ($1.22). In addition to the taxes, carriers can charge a flat-rate service fee of €6 ($7). This is paid either by the customer at the time of delivery, or they have been prepaid by the shipper.

Commercial mail order companies based outside the EU will have to be registered for the new IOSS VAT system. Under this arrangement the customer will pay the taxes to the mail order company. As a rule, they will already be included in the final invoice amount.

At the moment a consumer can buy a compatible HP 56 inkjet cartridge from an Asian website for €4.50 ($5.50), delivered to the EU and no taxes or duty are paid. A similar cartridge bought online within the EU will cost around €12 ($15) taxes paid. A €7.50 ($9) difference.

Under the new system, that takes effect on the 1st July, the Asian cartridge will cost €4.50 + VAT, + handling charge. Note that the VAT rate will vary depending on which member state the consumer lives in and handling charges may vary from courier to courier.  

If you sell into the EU, you need to register for the new EU VAT system and use the Import One Stop Shop (IOSS). You only need to register once and that applies to all EU member states. You as the seller, will be obliged to pay the taxes due to the EU via the IOSS VAT system and the taxes should be included in the seller’s final invoice amount.

Our advice: If you are selling into the EU, you should seek advice from a tax lawyer / consultant in your country of choice.

Categories : World Focus

Tags : Business EU IOSS Price increase VAT

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