From 1 July 2021, the VAT rules have changed.
These changes mean that there will no longer be an exemption for parcels valued up to 22EUR and therefore all the goods you are selling to the EU will now be subject to VAT, calculated at the local rate of the country your customer is based in.
Does this seem a little complex?
Don’t worry, this page helps explain your options.
If you do nothing, you could incur additional costs.
If you have no solution in place, your EU customers will have to pay the correct VAT plus handling / clearance fees before they can receive their parcel. This solution is called Delivered Duties Unpaid (DDU).
This could result in your customers refusing delivery of the goods, especially if they weren’t aware of this cost when they made the purchase.
If customers refuse delivery this could increase the risk of your goods getting lost in transit or returned, causing additional costs.
Use the Import One Stop Shop (IOSS) to ease the burden.
The EU has introduced a scheme called the “Import One Stop Shop” (IOSS).
IOSS allows you to register with just one of the 27 EU tax authorities, and to submit one monthly IOSS VAT return in a way that allows the right payment of VAT across the other EU tax authorities where your customers are based.
The process is enabled by an IOSS number. All you need to do is include your IOSS number in the electronic data that you provide to your parcel carrier. This simple step will enable all VAT owing to the various different EU countries to be captured. Below you will see three ways to use IOSS and obtain a number.
Who is IOSS relevant for?
Merchants must be trading:
1. With EU customers, and shipping to the EU customer from outside of the EU.
2. With consumers. Business to business sales are not allowed to be included in the IOSS.
3. Individual consignments (e.g. a single parcel) valued at up to 150EUR.
4. Physical goods that are not excise goods. Excise goods typically include alcohol and tobacco and any shipment that includes excise goods cannot be dealt with under the IOSS.
IOSS is not right for you? You have some other options...
If you’re selling goods up to 150EUR, on a marketplace, it’s likely that they already have a solution in place for you.
If you’re sending small but irregular volumes via your own e-commerce platform, and you’d like to ensure your customers continue to receive your parcels uninterrupted, then Delivered Duties Paid (DDP) might be right for you.
You will need to use a landed cost calculator, or similar, to determine duties, taxes and fees payable. Plus register for the DDP service through your chosen parcel carrier and pay VAT/Duty on behalf of your EU customer upfront.
It can be used for goods valued above as well as below 150EUR.
Most well-established parcel carriers will offer this service. To use it, please contact your preferred carrier.
Here are some other frequently asked questions that we think you might want to know about.