EU levels VAT playing field for low-value imports
Picture: Deutsche Post AG
The new VAT rules for low-value imports into the European Union that come into effect on July 1, 2021 will impact online retailers, shippers, and express, parcel and postal companies alike. This CEP-Research special report provides an overview of the legal changes, their impact on business customers and consumers, and how top carriers are responding.
Why make changes?
The EU E-commerce VAT Package comes into effect in all 27 EU member states on July 1, 2021. The overall purpose of the new regulation is to create a level playing-field between EU and non-EU retailers for low-value goods.
European online retailers have long complained that they face unfair price competition for sales of cheap goods from Chinese or other non-EU retailers who (unlike EU retailers) are not liable for VAT on low-value exports to the EU. In future, European buyers will pay the same VAT rate for goods purchased within their home country, from another EU country or from a non-EU state.
What are the main changes?
The key changes concerning shipments from a non-EU third country to buyers in the EU are as follows:
1. The VAT de minimis exemption for goods with a value of less than €22 imported from non-EU countries will end. VAT will thus be liable on all commercial goods imported from third countries such as China, the US and the UK, irrespective of their value.
2. All import shipments to the EU (regardless of value) will thus also require a customs declaration. But goods worth less than €150 remain exempt from customs duties.
3. The merchant (or online marketplace in the case of items priced under €150) selling the item will be liable for charging VAT (as part of the sale price) and collecting the levy.
4. Import One Stop Shop (IOSS): to simplify this new process, non-EU online sellers (including marketplaces and platforms) can register to pay VAT in just one EU country for all sales of goods worth up to €150 to buyers in the EU. That country’s tax authority will forward the relevant VAT sums to all other EU states.
5. If the seller does not charge or collect VAT (or any necessary customs duties), the delivery company is responsible for collecting the outstanding sum from the consignee/recipient.
Further information on the legal changes (selection):
How are carriers responding? What changes for customers?
Many top express, parcel and postal operators in Europe have provided detailed information for customers over the past few months about the forthcoming changes and how customers can or should respond. Important for recipients: if carriers have to collect payment of outstanding duties, then they will normally apply a small service fee on top.
DHL Express is adjusting its Electronic Shipping Solutions and Customer Integrations to enable automated data flow from customers to its clearance applications. It is also enhancing its IT systems, as well as hiring and training new employees to prepare the additional customs declarations.
It has strongly advised customers to provide a complete and accurate Goods Description on their DHL Waybill and to transit their Commercial Invoice data for all shipments electronically to the company.
In Germany, Deutsche Post DHL has extended its existing procedures to shipments valued at less than €22. If the sender has not paid import duties in advance, then DP DHL pays the necessary import charges to customs and collects them from the recipient upon delivery (plus a €6 service charge).
In its advice to customers, UPS recommended that importers should agree billing terms with shippers “to avoid unexpected charges upon delivery” and should submit electronically a complete and accurate commercial invoice for all shipments. In addition, if customers have registered for an EU Import One Stop Shop (IOSS) number, this can be stored in the UPS shipping systems, thus eliminating the need to provide this number for every single shipment.
The company informed European consumers in a separate fact sheet that outstanding import charges would be collected in advance or at the point of delivery and noted that it might “charge a nominal fee per shipment to outlay VAT”.
For its part, FedEx informed customers about the changes with several simple scenarios and advised businesses using several marketplaces to sell to the EU to keep clear evidence of the sales carried out via each marketplace. The company noted that non-EU firms selling through marketplaces might be able to de-register for VAT in EU member states, since it will be the marketplace that is deemed to be the supplier of the goods and therefore responsible for collecting the VAT. “This could reduce the administrative burden for non-EU sellers,” it pointed out.
Similarly, DPD Germany informed customers that a customs declaration must always be submitted for all shipments from a third country. “We take care of this for you together with our partner Sovereign. You simply pay the import duties via our secure online payment platform,” the company said. It also requires a complete and accurate description of the goods along with electronic transmission of the fully completed commercial invoice.
Bpost collects payment in advance
Among European postal operators, bpost has launched an extensive campaign, including on social media, to inform customers, and especially consumers, about how the changes might affect them.
In particular, the Belgian postal operator is adopting a clear policy regarding any outstanding import duties. It will insist on advance payment by recipients to avoid having to collect payments on doorsteps. Shipments with outstanding duties will be held back and customers will be informed by app, SMS, e-mail or letter. They can then use a new secure payment method in the My bpost app or the bpost Track & Trace function. Payments to delivery workers or at pick-up points will no longer be possible. The parcel will be delivered once payment has been made.