From tomorrow (Thursday 1 July 2021) major changes are being introduced to VAT payable by traders selling into the EU and within the EU’s trading bloc of 27 member states.
The new rules abolish exemptions from VAT registration for businesses selling low-value goods to EU consumers and require firms to collect VAT from their customers at the point of sale — a rule that in particular affects e-commerce businesses selling via online marketplaces.
Local EU VAT rate
All goods sent directly from GB to consumers in the EU, both via online marketplaces and sales made directly, will be subject to the local rate of VAT in the buyer’s country:
Items imported into the EU with a value less than €22 (£15) will no longer be exempt from VAT.
Firms selling items valued at less than €150 are now required to either sign up for a new import one-stop-shop scheme (IOSS), use an online marketplace that will charge or pay their postal service to provide the documentation.
An added complexity is that there are different rules for GB-based traders and those in Northern Ireland, which remains in the EU customs union and single market.
‘SMEs not ready’
Speaking to The Times today, IOE&IT director general Marco Forgione said: “We don’t believe that SMEs are ready for this change, and the calls we are taking to our Technical Helpdesk are becoming ever more urgent.
“The worry is that when the rules change, thousands of sellers of relatively low-value goods will become enmeshed in a system for which they are not prepared and as a result will stop selling to the EU altogether.
“Bureaucracy is consistently cited by SMEs as the number one barrier to international trade. This is going to pile even more of it on to small companies operating on tight margins.”
One estimate, by VAT specialist Avalara, is that 26,000 firms will have to register in an EU member state for the first time.
Legal entity needed
Kevin Shakespeare, director of the IOE&IT Academy, commented:
“For reporting of EU Value Added Tax via OSS and IOSS, e-commerce firms will need to set up a legal entity in an EU country or get an authorised fiscal representative in that country.
“If GB traders don’t register, their ability to provide e-commerce to the EU will be severely impacted from 1 July.”
Help from IOE&IT
The Institute is helping GB e-commerce traders take advantage of these schemes, smoothing any complexities.
This support ranges from sessions with our renowned Technical Helpdesk through to full consultancy to handle the necessary administration of registering in the EU.
See here for the following services:
1. Technical Helpdesk
Start your VAT journey with advice from our Technical Helpdesk.
Not an IOE&IT Business Member? Join here.
2. Training and consultancy
If your VAT situation is more complex, our VAT training and consultancy packages will ensure you maintain and grow your business with the EU.
3. Registration service
The IOE&IT is offering a fixed-price registration and representation service, allowing traders to register in the EU without complications, at a preferential rate to IOE&IT members.