Following the UK’s departure from the EU on 1 January 2021, the sale of goods outside the UK will be treated as an export. For VAT
purposes, these will be treated as zero-rated exports.
The changes in effect from 1 January 2021
If you are selling goods to the EU customers, the business will need to decide who will be responsible for paying the import VAT. If the customer is responsible for importing the goods into the EU, there will be no VAT responsibility for you as a business and the burden will be only on the customer.
You could arrange for the shipping agent to manage the import of goods into the EU and pay the import VAT (possibly also customs duty if the value of goods is more than 150 €) on the customers’ behalf. The UK seller will reimburse the shipping agent for the payment. Please note that the EU import VAT is not recoverable as input tax.
If the seller is the importer to the EU, they will need to register for the VAT in the EU country where the goods enter. That means a scenario might occur where the seller must register for VAT in multiple EU countries. Currently, the EU and non-EU companies will not have a VAT obligation if the consignment of good(s) is 22 € or less if they are selling goods directly to the EU consumers.
The business can import all the goods into one country to avoid this situation and be subject to the EU rules in force before 1 January 2021. Supplies of goods from one EU member state to VAT-registered customers in another EU member state will be treated as zero-rated intra-EU supplies, or distance sales if sold to non-VAT registered customers. Until 30 June 2021, the EU-distance selling thresholds are:
- 100 000 € per annum: Germany; the Netherlands; Luxembourg.
- 35 000 € per annum or local currency equivalent for all other members of the EU.
The upcoming changes in effect from 1 July 2021 – the EU E-Commerce VAT package
The EU will be implementing new VAT obligations for carrying out cross-border sales of goods. The new rules were supposed to be introduced from 1 January 2021 but have been delayed due to Covid-19 until 1 July 2021.
Import One Stop Shop (IOSS)
That works similarly to the single VAT return for business-to-consumer (B2C) digital sales (in place since 2015 and referred to as Mini One Stop Shop or MOSS). That means there will be no requirement for overseas sellers to register for VAT in multiple countries for selling consignments that are less than 150 €. The seller will only be required to register for VAT in one EU country to use the IOSS system. If they hold their stocks in multiple EU countries, then they will have to register for a VAT in all these countries.
From 1 July 2021, the UK seller will charge and collect the VAT in the country where they sell the goods or services to EU customers. The UK company must declare and pay the VAT globally to the Member State as identified in the IOSS. These goods will then benefit from a VAT exemption upon importation, allowing a fast release at customs.
When the IOSS is not used, a second simplification mechanism will be available for imports. The import VAT will be collected from customers by the customs declarant (e.g. postal operator, courier firm, customs agents) who will pay it to the customs authorities via a monthly payment.
When the consignment of good(s) exceeds the 150 € threshold, the import VAT payment at customs remains. That could still trigger a regular VAT registration in the country of importation.
If you should now register for VAT due to selling the goods to the EU customers, then we can help you with VAT registration, EORI number, and monthly accounting. Contact us and ask for a personal offer.