Customers in EU countries can expect to pay extra on certain items purchased online
Specifically, lower value items could cost a little more, as the VAT exemption on goods valued at under €22 is scrapped.
Irish tax authorities have issued a statement to consumers warning them that smaller items could cost more due to the new VAT requirement. Similarly, a French consumer group has alerted customers to the changes.
The updated VAT policy is part of the EU’s e-commerce VAT package which aims to simplify VAT e-commerce VAT compliance. The new regulations take effect in July 2021.
Customers, be aware
We previously discussed how the new Import One Stop Shop (IOSS) can help online sellers comply with VAT on imported items.
But what about the customer perspective?
Overall, the provisions of the e-commerce VAT package - and the IOSS in particular - are very beneficial to customers. Using the IOSS, VAT is already accounted for at the time of purchase, and there are no additional costs to the customer.
However, Ireland’s Revenue has urged customers to pay careful attention to the terms of sale. The IOSS is an optional system, and not all e-commerce sellers will elect to use it.
However, under the new rules, VAT must be paid on low value items, regardless of how the retailer chooses to comply with VAT. Thus, customers should take careful note of whether VAT is included at the time of sale.
Pay now or pay later
As noted in the Revenue statement: “If the supplier is operating a duty paid model, the total price paid for the goods at the time of purchase will generally include Irish VAT and any duties due meaning no further Revenue charges will arise on delivery. However, where this is not the case, the amount of VAT and any duties due will be calculated by Revenue based on the information provided on the customs declaration.”
The competitive advantage of the IOSS
While the IOSS is not mandatory, there are a number of reasons why online sellers that drop ship to EU customers may elect to use it. As mentioned, the IOSS will, in many cases, simplify VAT compliance.
Moreover, the IOSS is attractive because it offers a potential competitive advantage. When using the IOSS, your customers do not have to worry about additional fees, including VAT and additional administrative fees.