VAT for all
The new regulation is primarily aimed at establishing tax fairness: goods from outside the EU are now subject to the same VAT as products sold within the EU. One of the most important changes is that the exemption limit for imported goods, which was previously EUR 22, has been abolished. Since July 1, all shipments with a value of less than EUR 22 supplied from third countries are subject to customs and must be declared accordingly – they are no longer exempt from import VAT! This means that VAT can no longer be avoided by deliberately misrepresenting the goods, for example, by declaring expensive electronic products from China as low-priced toys. Online merchants in the EU are no longer disadvantaged in relation to sellers from third countries.
Modification of the delivery thresholds
But the reform has also changed the conditions for e-commerce within the EU. Online merchants now have to pay VAT in the countries to which they sell their goods from a total delivery volume of 10,000 euros to other countries in the EU. These were previously mostly 35,000 euros per country. This means that many more online merchants are affected than before. They now have to deal more intensely with bureaucracy and look for viable ways to reduce their workload.
Platforms must pay their VAT
Things are also not getting any easier for the big platforms like Alibaba in China or Amazon. According to the new VAT regulation, the individual online merchants grouped together on the platform are no longer regarded as the sellers or suppliers, now it is the platform itself. This means that Alibaba and other platforms – both within and outside the EU – are now responsible for paying VAT.
OSS and IOSS simplify tax reporting
Online merchants have different options they can use to simplify tax processing. They can pay VAT for all EU countries centrally via a One-Stop Shop (OSS) in their home country, provided they are only domiciled in one EU country and only supply to end customers. The Import One-Stop Shop (IOSS), on the other hand, regulates the delivery of goods from third countries such as China, the USA, and the UK. Participating e-commerce merchants can pay import VAT for goods with a material value of up to EUR 150 to the respective tax authority through a tax representative based in an EU Member State.
Rising prices for consumers
This also has consequences for customers. An example: When buying a mobile phone case from China for 5.50 euros, 1.05 euros import VAT is now added plus the service fee of the shipping service provider for the digital customs declaration of approx. 6 euros – this leads to additional costs of 7.05 euros in total. Andreas Weidner, Vice President Customs at eClear, explains: “Part of the problem is that customs, taxes and fees vary greatly depending on the destination country. With hundreds of thousands of different tax rates and around 60,000 exemptions, it’s almost impossible for third-country traders to transparently manage their business without professional support.”
When customers order what they believe to be low-priced goods from an online platform, they have to be aware that the actual price will only appear at the end of the purchasing process – namely when they enter their delivery address, and it becomes clear to the seller what import VAT and other duties have to be paid. This is also where the need for an EU-wide database that correctly shows customs tariff numbers and tax rates becomes apparent. “The EU data is incorrect and incomplete,” Andreas Weidner says.
„Customs, taxes, and fees vary greatly depending on the destination country. With hundreds of thousands of different tax rates and around 60,000 exemptions, it’s almost impossible for third-country traders to transparently manage their business without professional support.“
Consequently, adapting to the new conditions is equally important for e-commerce merchants and their customers. Small online purchases in China in particular can become significantly more expensive – this is important for customers to know. Online sellers must pay special attention when it comes to finding uncomplicated solutions for managing their taxes and keeping customers well-informed. To avoid giving customers a bad surprise, merchants should ensure that they transparently disclose all additional costs, both for VAT and customs duties, in the checkout process.