Following the implementation of the second part of the VAT digital package, exemption limits or allowances no longer apply. Therefore, import VAT must be charged for each delivery of goods and a customs declaration is always required when importing goods into the EU. The IOSS (Import-One-Stop-Shop) can be used to make it easier to import goods up to a material value of EUR 150. But if the IOSS is not used, the merchant must register in each EU country and pay the taxes to the respective tax authorities.
New regulations for goods valued at less than EUR 150
An electronic customs declaration is required for deliveries with a material value of less than EUR 150. However, duties of less than EUR 1 are not levied. Since the exemption limit of EUR 22 has been abolished, import VAT is now due for every shipment. The import VAT can only be paid in the EU Member State where the transport ends, i.e. at the place of performance. Merchants shipping goods from a third country to various EU countries must register individually in each Member State and pay the tax to the competent authority.
To make things easier, the IOSS has been introduced for goods up to a material value of EUR 150 (value of goods + transport costs). We have already described the IOSS in more detail here. But if the IOSS is not used, another special procedure based on the new VAT law is available in addition to the standard procedure. Like the IOSS, this procedure can be optionally used to simplify the tax process.
How is the special procedure applied?
The new special procedure only applies to imports shipped to consumers in the domestic market and does not include goods subject to excise taxes (e.g. coffee, alcohol).
The special procedure works as follows:
The transporter (carrier, often the postal service provider or courier) collects the import VAT on a month’s imports from the recipient and pays it to the competent customs authority in the following month.
This special scheme makes things easier for merchants by offering the following advantages:
- The customs declaration is handled by the transporter, who ensures that the delivery is released for free circulation in the EU on behalf of the recipient.
- The transporter collects the import VAT from the recipient upon delivery, and then pays it to the customs authority within the framework of the approved deferral of payment.
- The transporter provides information to the customs authority regarding the delivered goods, the amount of import VAT collected, consignments awaiting delivery, and undeliverable or lost consignments. In case of doubt, the transporter must also verify the whereabouts of a delivery.
Merchants who choose not to use the special regulation or who send goods to EU Member States apart from Germany must declare the delivery of goods to the customs authorities, collect the import VAT from the recipient, and pay the tax to the competent tax authorities in the respective Member State.
Example: Smith, a merchant based in Turkey, supplies clothing in consignments valued at less than EUR 150 from Ankara to consumers in Germany and France. For his deliveries to Germany, Smith can apply for a special arrangement when declaring the goods to customs. In this case, the transporter of his consignments will collect the import VAT from the recipients and pay it in a lump sum to the competent authority on the due date.
This procedure does not apply to his shipments to France. In this case, Smith must take care of the registration and payment of the import VAT himself.
When are distance sales of less than EUR 150 exempt from import VAT?
Since July 1, distance sales of goods imported into the EU from third-country territories in consignments valued at less than EUR 150 have been exempt from import VAT if an identification number is provided with the customs declaration. This identification number is issued by the respective Member State. The taxable merchant and the transporter each receive an identification number. The transporter often works for several taxable merchants and therefore receives a separate identification number for each of them.
Merchants who handle delivery and customs declaration themselves must enter their identification number. If a transporter acts on behalf of the merchant – which is typically the case – he must provide the identification number assigned to the merchant.
Participation in this special taxation procedure must be registered in advance by the merchant or transporter with the competent tax authority. In Germany, this is the Federal Central Tax Office.
What happens when the value of the shipment exceeds EUR 150?
Neither the IOSS, nor the special regulation on import VAT, can be used if the value of a delivery from a third country exceeds EUR 150. The new distance selling regulations do not include any special conditions or simplified options for this. The merchant must first declare the shipment of goods to customs for release for free circulation in the EU. This customs office is where the duties based on the respective customs rate are payable.
Since there are no special regulations, the import VAT for a third country import is also due at the respective VAT rate (7% or 19% for Germany). This tax must be collected from the recipient and then paid to the competent tax authority. The import VAT is only levied on imports from third countries into the EU and is usually the same as the standard VAT. This is intended to prevent goods from being sold without VAT, since they are exempt from VAT in the exporting country.
It should also be noted here that the tax must be declared and paid in the EU Member State in which the transport of goods ends (country of destination). Accordingly, a separate customs declaration and tax payment to the competent authority is required for each Member State to which goods are delivered. However, import duties of less than EUR 5 are not levied.
Example: Seifert, a merchant based in Australia, sells smartphones valued at EUR 750 to EUR 1,000 to consumers in the Netherlands, Italy, and Sweden. Since these shipments exceed EUR 150 in value, Seifert is not eligible to take advantage of any special regulations. The company must therefore declare the deliveries in each of these countries, collect the import VAT, and pay it to the competent authority in the Netherlands, Italy, or Sweden.
Where is there a need for action by merchants?
If the special regulation for the payment of import VAT is to be applied to imports with a value of less than EUR 150 from third countries into the EU, the transporter must submit a request to the customs authority. However, the special regulation only applies if the delivery is made within the specified domestic market, i.e. to Germany, and does not contain any goods subject to excise duty.
The import of goods with a consignment value of less than EUR 150 from third countries into EU Member States is also exempt from import VAT if the identification number of the merchant (self-declaration) or the transporter is specified in the customs declaration. Participation in this special scheme must be registered in advance by the merchant or the transporter with the competent tax authority in the respective Member State. The individual identification number is issued by the respective Member State. In Germany, the competent authority is the Federal Central Tax Office.
Otherwise, the merchant must declare the delivery of goods to the customs service and pay the import VAT to the competent tax authority for each Member State.
Keep a clear overview with products from eClear
Gaining insight into the new IOSS regulations and special import VAT procedures, while making sure that customs and import VAT declarations are correctly submitted, can be complicated and time-consuming. eClear offers two practical solutions.
The eClear CustomsTariffs solution combines the rates for millions of products in the EU 27 (plus CH, UK, NO, IS) in a database that is always up-to-date. Integrated directly into your shop or system architecture, the software calculates customs or import VAT charges and displays them in real time in the respective national currency. And best of all: the unique EU-wide TAX Engine ensures that all exceptions and reduced tax rates are considered in the calculation.
Customs clearance is completely automated with the full-service ClearCustoms solution. Consumers can see the import duties and fees at checkout, and disbursement is handled by the integrated payment module. Registration of the merchant in the country of destination is not required. eClear serves as the ‘importer of record’ vis-à-vis the authorities and assumes all rights and obligations regarding customs.
Merchants based in a third country can supply their customers DDP (Delivered Duty Paid).