As of July 1st 2021, VAT changed for e-Commerce B2C businesses selling goods and services across EU borders. The change should allow fairer competition for all EU and traders overseas, simplifying the process, and reducing the administrative burden for many businesses, but many of our clients are finding that the process remains tricky to navigate at times.
So, let’s look at what this means for e-Commerce businesses
The new One-Stop Shop filing system should put an end to the complicated distance selling thresholds system and multiple VAT registrations required to sell to different EU countries. As of July 1st there are no thresholds for non-EU sellers such as UK based e-Commerce businesses.
We have summarised the latest information from the official bodies to give you our top takeaways for UK based e-Commerce businesses:
One-Stop Shop (OSS)
- An optional scheme offering an online portal allowing companies to account for VAT in a single interface on a quarterly basis (instead of having to register in each EU Member State where they make B2C supplies).
- UK based businesses should register for the Union OSS (One stop shop scheme) in the country where you hold stock. (EU member states register for OSS in their own country).
- Note that OSS only accounts for payable VAT, so if you incur VAT in other member states, you may wish to keep your local VAT registrations in order to deduct the VAT incurred on purchases in your VAT return.
Mini One-stop shop (MOSS)
- An existing scheme which only allows you to account for VAT on supplies of Telecoms, broadcasting and electronic services. The new OSS scheme is an extension of the MOSS to account for other goods and services.
New Import One-Stop Shop (IOSS)
- Another new portal allowing EU/non-EU business to account for VAT on low value (less than €150/£135) distance sales of imported goods. Traders will charge VAT from EU customers on single orders with a value up to €150/£135.
- Businesses submit a monthly IOSS return to remit VAT collected from EU consumers. If online sellers or marketplaces do NOT use the IOSS, VAT collection responsibility is still passed to the courier as it was prior to this new legislation.
- Duty is not payable on goods under the value of €150/£135, only VAT.
- For orders over €150/£135, normal customs procedures and import tax upon entry to the EU apply.
- Main advantage of IOSS is that buyers know how much goods cost upon ordering, as they won’t incur additional import duties on receipt of their goods, and this process speeds up customs clearance, allowing faster delivery.
- Note– if you sell to UK customers from UK based stock you still need a local VAT registration to submit returns.
- UK based businesses must appoint an EU-established intermediary to register with the IOSS, who will be jointly liable for any import VAT owed.
What about B2B transactions?
- These new rules do NOT apply to B2B transactions – B2B VAT compliance has not changed.
How will this be implemented in the Shopify platform?
- Shopify will update tax settings from 1st July automatically to charge the VAT rate of the buyer’s shipping country for sales within the EU.
- Read the Shopify article on the topic for further clarification and instructions for Shopify merchants.
Do you need help with your international eCommerce? Our Shopify experts can help to optimise your global potential, with everything from best practice international SEO to translating your website effectively into multiple languages.
Contact us to see how we can help your navigate the VAT changes post Brexit.
About the Author
Iain Beaumont is the Founder and owner of VUMO Digital, a web design and eCommerce agency based in Oxford.
After graduating from the University of Edinburgh in 2004, Iain joined the British Army before heading into the City and working for a US Investment Bank. With a huge interest in tech development, and from running several successful eCommerce stores himself, Iain now shares his expertise through his articles on the VUMO website.