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Changes to EU VAT rules

Changes to EU VAT rules

The European Union (EU) is making some important changes to its Value-Add Tax (VAT) rules, which will come into effect on July 1, 2021

The European Union (EU) is making some important changes to its Value-Add Tax (VAT) rules, which will come into effect on July 1, 2021

Which businesses will these changes affect?

All businesses will be affected, but the changes will mainly affect business-to-consumer (B2C) sales and online marketplaces based outside of the EU, as well as EU-based businesses selling to consumers in the EU.*

These changes could lead to simpler procedures and reduced administration. There could also be broader implications for the way you conduct business into the EU.

The three biggest changes are:


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For more information about these EU VAT changes, please download our EU VAT overview guide.

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The United Kingdom (UK) introduced their VAT rules in January, 2021, following its departure from the EU. For more information on the UK VAT rule changes, please download our UK VAT overview guide


1. Removal of the EUR €22 import VAT exemption

What does it mean?

From July 1, 2021, Value-Add Tax (VAT) will be charged on all commercial goods imported into the EU, regardless of value. For consignments with a value of €150 or below, this can either be charged at the time of the sale by using the new Import One-Stop Shop (IOSS) or be collected from the end-customer by the customs declarant (FedEx).

How will this affect my business?

If your business is based in the U.S. or anywhere else outside the EU, you will no longer be able to export shipments valued under €22 to EU consumers free of VAT.

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How might it work in practice?

Scenario

An online business in the U.S. sells one pair of socks worth €10 to an EU-based consumer.

Before July 1, 2021

You can send the shipment to the EU free of VAT since the total value of the goods is less than €22.

After July 1, 2021

All shipments will be subject to VAT regardless of value. VAT will apply at the rate set in the buyer’s country of residence.

2. Introduction of an Import One-Stop Shop (IOSS) for VAT payments

What does it mean?

You’ll have two options for collecting and paying VAT for e-commerce sales of €150 or below.

  • The new Import One-Stop Shop (IOSS) lets any seller or online marketplace charge VAT at the point of sale and pay it directly to the tax authorities.  This makes the process simpler and more transparent for your customers and helps ensure efficient customs procedures.
  • If you do not use IOSS, FedEx will collect the VAT from the customer prior to delivery and pay it to the tax authorities.
How will this affect my business?

To simplify collecting and paying VAT, you’ll need to sign up for IOSS, or consider the joint FedEx/KPMG solution which can take care of the setup, collection, and payment for you.

  • To sign up for the IOSS, you’ll need to already be registered in an EU member state. 
  • If you’re not, you’ll need to appoint a third party intermediary to register and declare the VAT on your behalf. 
  • You’ll then need to provide your IOSS number to the customs declarant (FedEx) when shipping to the EU.

With IOSS, VAT for EU sales will be submitted via a monthly tax return in the nominated EU member state, which will then forward the VAT declaration and payment to the appropriate countries. 

As a result, you’ll no longer have to register for VAT in every EU country you sell in. See below for details on how the FedEx/KPMG solution can simplify this process even further for you.

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How does this work in practice?
Scenario

Your U.S.-based e-commerce business sells electronics with a value of less than €150 to customers in five EU countries.

Before July 1, 2021

You must register and account for VAT in each EU country.

After July 1, 2021
  • You can choose to close your foreign VAT registrations and register for IOSS in one EU country, charging VAT at the point of supply/sale.
  • A second option is to continue as you do today, with your customers paying VAT when items are imported.
  • You can also turn to FedEx, who along with KPMG, a global leader in audit, tax, and advisory services, can ease the burden on you and your customers.

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To sign up for the Import One-Stop Shop (IOSS), you should register on the IOSS portal of an EU Member State available starting April 1, 2021. Businesses not already established in the EU will normally need to appoint an EU-established intermediary to fulfil the VAT obligations.


3. Certain online marketplaces can become the collector and payer of the required VAT.

What does it mean?

An online marketplace is simply an online platform that facilitates the sales transaction, allowing you to sell your goods directly to customers.

Certain marketplaces, rather than their sellers, will now be responsible for collecting, reporting and remitting the VAT due from the end-consumer if they register with the IOSS. This would apply for sellers of goods up to €150.

How might it affect my business?

If you sell through a marketplace that has signed up for the IOSS, you’ll need to provide the marketplace’s IOSS number to the party responsible for making the customs declaration (FedEx).

If you use several marketplaces to sell your goods, be sure to keep clear evidence of the sales carried out via each. You should also provide the corresponding IOSS number for each sale to the customs declarant.

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How might it work in practice?
Scenario

Your U.S.-based e-commerce business sells a €90 vase to an EU customer, via a qualifying online marketplace that opted for the IOSS.

Before July 1, 2021

The customer buying the vase from you pays the VAT on their purchase at the time of importation.

After July 1, 2021

The marketplace the vase is being sold through uses the IOSS and collects the VAT from the customer at the time of sale, and then pays it to the relevant authorities.


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More details on using the IOSS and the other important changes to the EU’s VAT rules are available from the Publications Office of the European Union.


How we can help keep your business moving in the EU

As your shipping partner, we’re here to bring you solutions that not only keep your packages moving, but keep your business moving, too. 

With new VAT rules coming soon, we’ve joined forces with KPMG, a global leader in audit, tax, and advisory services, to offer an exclusive, discounted VAT compliance service that makes Import One-Stop Shop (IOSS) compliance easier for your business.

We can help you with:

  • Registering for IOSS registration with dedicated support
  • Preparing and submitting your monthly IOSS returns
  • Providing information about VAT payment due dates, bank account details and payment references
  • Forwarding and explaining any notifications from the tax authorities in relation to IOSS
  • Updating you on your IOSS obligations and IOSS returns

Helplines (between 9:00 and 17:00 Central European Time)
Germany: +49 30 3187 7935
UK: +44 20 3769 4348
Spain: +34 910 601 599
France: +33 1 78 90 37 45
Italy: +39 06 97628741
China: +86 108 783 3297
US: +1 718 887 9738
 

Learn more about FedEx/KPMG VAT services.

How to provide your IOSS number to FedEx

Customer shipping platform Where to enter your IOSS number
FedEx.com TBD
FedEx Ship Manager Sender Tax ID 
FedEx Ship Manager Server Field 1139 - Sender IRS/EIN/EORI Number
FedEx Web Services Shippers TINS/TINSTYPE/NUMBER
FUSE Shippers TINS Number
Toolbox VAT field
FedEx API Shippers TINS Number
Your own system integrated with one of the FedEx standard tools Adjust the mapping of your data to the relevant field.
Third Party Provider

Contact your provider and they will supply the details for your platform.


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Paper air waybills cannot be used with IOSS shipments. Save time by using one of our automated shipping tools.



*EU countries are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Please note that, under the terms of the EU-UK Joint Protocol, Northern Ireland will remain part of the EU VAT area for goods. This means that these new provisions will also apply to goods imported into Northern Ireland from the rest of the world.

The information provided does not, and is not intended to, constitute legal and/or tax advice; instead, this information is for general informational purposes only. This information may not constitute the most up-to-date legal or other information. Readers of this information should contact their own advisor to obtain advice with respect to any particular legal and/or tax matter. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. The content on this posting is provided “as is”; no representations are made that the content is error-free.