The VAT Bulletin: May 2022
03 May 2022
Do I need to register for VAT? A guide for SMEs, freelancers and sole traders
18 Mar 2022
Unannounced HMRC inspections are becoming the norm
17 Mar 2022
HMRC’s U-turn on VAT Group registration delays
09 Mar 2022
The eye of the storm: VAT and Brexit one year on
18 Feb 2022
There is a range of changes being introduced across the EU from 1 July 2021. These have been summarised below. If you think this may affect your business, please contact the Gerald Edelman VAT Team.
Currently, low-value goods under €22 sent to consumers in the EU have no VAT on entry into the EU. From 1 July the €22 low-value goods VAT exemption will be abolished. Goods under €22 going into the EU will now attract import VAT.
In addition, with effect from 1 July 2021, the concept of distance sales will be widened to include B2C goods sold from outside the EU made by EU or non-EU operators. The place of supply is the EU and VAT must be accounted for in the relevant member state.
There is a lot of information about this I-OSS scheme (Import One Stop Shop), it is for goods (consignments) sold from outside the EU up to €150 only – as this is a new scheme being introduced it seems beneficial to include a little more detail, based on what we know so far:
Goods not exceeding €150 and NOT sold using an online marketplace (OMP) e.g. Ebay or Amazon:
You can zero-rate goods (consignments) up to €150 to your EU customer but there will still be import VAT due on its value, this will now be due in the EU/receiving member state. The options to deal with this import VAT are:
1. Register for Import One Stop Shop (IOSS)
This will involve a unique IOSS identification number (12 alphanumeric characters) which should be listed on all packages sent to the EU. This is for goods being sent to EU customers from outside the EU. The scheme will show that VAT is being correctly accounted for. To operate this:
- You can register for IOSS now (from 1 April 2021), you can register for this in any EU member state (you do not need to be registered there for VAT too).
- You can choose to appoint an EU established intermediary, but it is not mandatory if we have a mutual agreement with the EU.
- The IOSS user will have a unique identification number, this is distinct from an EU VAT registration number, the IOSS ID can only be used to declare distance sales.
- IOSS will be a monthly filing submitted to a tax authority in one nominated EU member state. It will declare import VAT due in all EU countries. Sellers will have to make a single cash payment of the VAT due to the country where they are IOSS registered.
- Records must be kept for 10 years
- VAT should be charged by the seller (at the applicable rate of their customer’s country) at the point of sale and the seller should then pay the VAT collected to the relevant member state through their IOSS return.
- If you are already registered for VAT in an EU member state, and you hold stock and sell goods in that country, you must declare those sales on your usual domestic VAT return.
2. Arrange to send the goods DDU
Import VAT will be due on the goods on entry into the EU. The customer will be the importer of record and will need to pay any import VAT (plus courier’s handling fee) before they can take possession of the goods. Some courier companies have the facility for the end customer to pay these fees online prior to receiving the goods. The courier companies may charge an additional handling fee for this.
To facilitate trade, the courier will make a monthly declaration and payment to the relevant EU tax authority.
3. Deliver DDP
Deliver DDP using your courier but you will need to ensure that your courier will be declaring/paying any VAT and duty in the EU, on your behalf, prior to sending any goods, otherwise, you will have to register in the relevant member state or register for IOSS.
4. Register for VAT in EU countries where you sell goods
However, you will need to hold stock in each of these countries. This will enable you to recover any import VAT and account for VAT on the sale through each EU registration’s VAT return.
5. One Stop Shop (OSS)
This scheme should be used for non-established and established EU sellers who hold stock in an EU country and despatch goods from that member state. You should charge and account for VAT on all other EU sales in that member state on that member state’s VAT return. Sales up to 10,000 euros can be accounted for as a domestic sale (with domestic VAT charged). Once that threshold is breached, EU sellers can use OSS and account for VAT on their domestic VAT return but declaring their customer’s VAT rate. OSS is replacing the distance selling mechanism and the thresholds are being scrapped with a blanket 10,000€ limit across the EU.
- OSS is for goods moving within the EU and IOSS is for imports so they are not to be confused.
- If you also sell goods that are delivered directly to the customer from outside the EU, you cannot use OSS and must also register for IOSS.
- You can register for OSS from 1 April 2021
- OSS returns are submitted quarterly
Goods over €150
OSS can also be used for goods over €150 and is the replacement for the existing distance selling mechanism, it is only for goods moving between member states. IOSS however, is for low-value goods sold by non-EU (hence “import” OSS) sellers to consumers (B2C). IOSS is not available for goods over €150 because they may be subject to import duty, whereas goods sold under OSS will not be subject to import duty because they are moving between member states hence, there’s no monetary limit.
You can zero-rate goods over €150 to your EU customer but there will be import VAT and there may be duty due on its value. The options are:
- Arrange to send the goods DDU – the customer will be the importer of record and will need to pay any import VAT and duty (plus courier’s handling fee) before they can take possession of the goods. Some courier companies have the facility for the end customer to pay these fees online prior to receiving the goods. If you only sell goods occasionally to the EU, this may be the simplest solution for you.
- You can send the goods DDP – you will be responsible for any import VAT and duty, via your courier, and the goods can be delivered directly to your customer.
- You can register for VAT in each of the EU countries where you sell goods. This will enable you to recover any import VAT and account for VAT on the sale through each EU registration’s VAT return.
- Providing you hold stock in an EU member state, you can register for VAT there and, using this VAT number on your invoices, charge and account for VAT on all EU sales on the OSS single VAT return in that member state to report EU sales. If you hold stock in more than one member state you will not be able to benefit from the OSS single return simplification and you will have to register in each country where you hold stock instead.
As before, duty may be due on goods that are not of UK or EU origin and you must have the necessary information to complete any custom’s declaration, including.
- Detailed product description
- Product quantities
- Product sale price
- HS Codes (per product)
- Country origin code
- Currency code
- Customer contact information
Using an Online Marketplace (OMP)
The OMP is considered the deemed supplier for B2C consignments under €150 and will account for the correct amount of VAT to the relevant tax authority. This will be in the same way as it currently happens in the UK.
An OMP is an electronic interface that includes online marketplaces, platform, portal or similar whose role is to introduce customers and sellers who then enter into a contract that results in a taxable supply (sale).
It is an OMP if they:
- Control the terms and conditions of the sale
- Authorise the charge to the customer for payment of the goods and/or
- Order or deliver the goods.
It is not an OMP of it only provides one of the below:
- Payment processing
- Listing/advertising the goods
- Redirecting customers to other marketplaces without any further involvement.
If you sell goods or consignments over €150 or you make OMP sales B2B, you may require your own EU VAT registration if the OMP will not declare these sales on their VAT return.
If you are struggling to keep up with the ongoing legislative changes in trading and selling goods with the EU, feel free to contact our VAT experts at Gerald Edelman.
With over 30 years of experience in the private sector, and our ex-HMRC VAT inspectors know-how, we are very well placed to help you to overcome your business challenges around VAT, across a broad spectrum of industries, ensuring that your tax obligations are met in a timely and efficient manner.
Gerald Edelman aims to work with you as your trusted advisor, with complete transparency in fees, and we are happy to provide you with a quote for a specific service that you require.
Get in touch with our VAT specialists by clicking the link below, or call us now on +44(0)20 7299 1400 for a free initial consultation.Get in touch Back to top