A predicted 26,000 eCommerce sellers will face £180m in added penalties as the EU launches new VAT rules on sales coming from outside the bloc.
Beginning July 1st the new VAT rules will affect companies in Britain following Brexit rulings.
The new EU ‘One Stop Shop’ (OSS) rules will remove VAT dispensation from SMEs and goods that do not surpass €22 (£19). This means that around 26,000 UK e-commerce sellers are recommended to register for VAT in an EU member state for the first time.
Additionally, the Import One Stop Shop (IOSS) system will allow UK businesses that make sales of goods with consignment value below €150 to customers in the EU to register and manage their VAT in a single EU member state.
The majority of these companies will have to pay at least €8,000 a year each, which is roughly £180m in total.
If the new VAT rules apply to your business you’ll have three options when trading in the EU:
Register for VAT in a member state of the EU (for the purpose of charging VAT at the rate applicable in the EU member state where the goods are shipped to).
Subcontract VAT compliance to selling platforms such as Amazon or eBay.
Ask your postal service to handle VAT (with that VAT generally being paid by the customer prior to taking delivery of the goods).
With platforms typically charging sellers about 30% of gross prices for their VAT services. It is recommended that businesses doing more than 150 transactions a year should register themselves in an EU member state.
Amazon and other platform operators will be obliged to declare the VAT that is due on the transaction when it facilitates a supply of goods under €150 in value.
Each EU member state has an online OSS portal, where businesses can currently register to use it for transactions made on or after July 1st 2021. This singular registration will be valid for all eligible supplies made by online sellers including electronic interfaces.
However, for the purposes of registering for EU VAT under the IOSS, at the moment a UK business will need to appoint a local EU intermediary to enable it to sign up to the scheme.