Major changes are taking effect in EU VAT from 1 January 2021. It is really important for UK online retailers to understand what’s going to change. This will then allow UK online retailers to make appropriate changes in their systems, process and prices.
From 1 January 2021
Goods sent from the UK to consumers in the EU will be zero rated for UK VAT purposes.
These will be exports for the UK sellers.
But, those will be imports for EU consumers. Therefore, will be subject to import VAT on arrivals in the relevant EU member state where the consumer belongs.
The EU consumers will only be able to take delivery of goods after paying the import VAT.
The effect of the above new rules
EU consumers may find UK goods more expensive.
It may discourage EU Consumers to buy from the UK sellers.
Possible solutions for UK sellers
Only from July 2021, UK sellers will have two alternative solutions
✔Keeping the stocks in the UK but arrange for the EU import VAT to be paid on behalf of EU consumers via carriers or agents.
✔The UK sellers may not need to register for VAT in EU then.
✔Hold the stocks in the EU to arrange the fulfilment of EU sales orders.
✔The UK sellers may need to register for VAT in more than one EU state. This will depend on the relevant Distance Selling thresholds.
From 1 July 2021
EU is planning to introduce two ‘one stop shops ‘ to ensure an easier way to VAT compliance throughout EU.
The two ‘one stop shops’ will work as follows:
Import One Stop Shop (IOSS) – where stocks are held in the UK
All UK supplies of goods to EU consumers will be subject to EU import VAT.
To facilitate the management and payment of VAT, IOSS will be implemented from 1 July 2021.
Registration for the IOSS will be necessary for consignments valued up to EUR 150.
If UK businesses do not register and pay the import VAT through IOSS, the consumers in the relevant EU states will have to pay the import VAT.
One Stop Shop (MOSS) – where stocks are held in EU
If UK sellers hold stock in EU, then they will only need to register in any one EU state.
This will allow UK retailers to file single VAT return and pay the appropriate VAT rates on sales to consumers in all 27 member states.
Unless a deal is made between UK and EU, all UK businesses will have to comply with the EU VAT registration.
There may be a zero registration threshold for UK businesses then.
From 1 January 2021 the distance selling threshold for sales from EU member states will no longer apply.
There is no VAT registration threshold for businesses established outside the UK
They will be required to register for VAT on any value of sales.
We set up excellent finance function for ecommerce retailers. Please contact us if you need help from expert ecommerce accountants in the UK.