One of the important, but largely overlooked changes is the treatment of lower value items.
As the regulations currently stand, goods imported into the EU worth less than €22 are not subject to VAT. However, from 1 July 2021, all commercial goods imported from a third country will be subject to VAT, including those worth less than €22.
The good news is that third party importers can elect to take advantage of the new Import One Stop Shop (IOSS) mechanism for all imports valued at under €150.
What is the IOSS for?
Under the new rules, the seller does not pay import VAT or duties at the point of entry. (Officials also hope this will prevent delays and make low-value imports more efficient). To facilitate the import, you must make an import declaration using the proper IOSS identification number.
Instead, local VAT is charged at the point of sale, applying the applicable VAT rate where the customer receives the goods.
The seller subsequently submits a monthly electronic VAT return using the IOSS portal. The seller will also be obliged to make a monthly payment of VAT declared.
Note that non-EU businesses are required to appoint an intermediary to take advantage of the mechanism.
Which goods fall under the IOSS?
The IOSS is for B2C sales to customers in the EU. In addition, the goods must be dispatched from outside the EU at the point that they are sold.
The IOSS cover items valued under €150 or a consignment of goods valued under €150 in total. The IOSS does not cover items subject to excise, such as alcohol and tobacco products.
The IOSS benefits customers because they only pay for VAT at the point at which they purchase the item. There are no additional fees when goods are delivered and no surprise costs.
VAT rules for online marketplaces
Under the new e-commerce rules, if the sale of goods is made via an online marketplace, then the marketplace itself is responsible for charging and accounting for the applicable VAT.