Impact of EU VAT and duty changes

On July 1, 2021, significant changes were made to the rules on VAT and duty treatment of goods sold and shipped to customers in the European Union (EU).

Primarily targeting business to individuals and ecommerce transactions, they affect businesses and online shoppers.

From July 1, the historic distance selling rules and thresholds were replaced by an EU-wide value of €10,000. This applies to sales of goods and electronically provided services.

Now, when goods valued above €150 are sold by a UK company to individuals in different EU countries, and transport is arranged by the supplier, a new VAT accounting procedure applies.

The new rules move the place of supply to the country in which the goods are supplied. Affected businesses can use a new One Stop Shop (‘OSS’) VAT accounting procedure to account for VAT overseas, avoiding the need to register in different countries.

Suppliers of telecommunications, broadcasting and electronic services to EU consumers could declare and pay the VAT due in other EU Member States centrally on one VAT return under the Mini One Stop Shop (‘MOSS’) online accounting system. From July 1, 2021, the MOSS accounting procedures cover all B2C services in EU Member States where the supplier is not established in that country.

OSS declarations or returns must be submitted quarterly. However, the deadline for submitting declarations via OSS, as well as the due date of the tax liability, has been extended by 10 days. A special registration number is required to participate in OSS procedures.

A new OSS procedure called the Import One Stop Shop (IOSS) aims to simplify the declaration and the payment of VAT on B2C supplies that have a value less than €150. Suppliers can choose to continue to declare and pay VAT on EU imports according to current arrangements. Most goods that are valued at less than €150 will continue to be exempt from customs duties. The IOSS platform can be used to record and account for VAT on sales throughout the EU, removing the need to register in every EU country in which goods are sold. Goods imported into the EU with a value up to €22, previously exempt, are now subject to VAT and require formal customs clearance, although most goods valued at less than €150 will continue to be exempt from customs duties. Suppliers must ensure they produce an accurate commercial invoice to reduce the risk of customs delays.