Brexit: What are the new VAT rules for online sellers?

If the goods will be shipped from the UK (or Great Britain for EU consumers)

Sales to EU and non-EU customers will be treated as exports from the UK and will be zero-rated subject to the seller obtaining evidence of export.

However, VAT and duty may be payable in the customer’s country, particularly since the optional low value consignment relief (LVCR) for goods less than €22 available in many member states is being removed from July 2021 as part of new EU legislation (originally planned for Jan 2021 but delayed by EU as a result of COVID-19).

As such, there are a number of scenarios to consider.

For consignments to EU customers in the period January 2021 to June 2021

If the value of the package is less than €22, then it will be exempt from VAT and duty under the existing low value consignment relief in those member states applying LVCR.

For packages with a value of more than €22 or in those member states without LVCR, import VAT and duty will be payable. The seller can make (or arrange to make) the necessary declaration and payments rather than the customer, to avoid delays (in the same way it may already do for supplies to non-EU countries).

For consignments to EU customers post July 2021

1. The seller can opt to charge VAT at the point of sale rather than pay import VAT if the value of the consignment is less than €150. In order to do this, it must register as a non-EU supplier in a single member state for the Import One Stop Shop (IOSS) – it may be necessary to appointing a fiscal representative in some member states. Import VAT will then be payable in accordance with the VAT rate in the customer’s member state (using the delivery address) in a quarterly return submitted in the member state where registered. This is equivalent to a local supplier charging VAT on the sale to their customer such that EU suppliers are not at a disadvantage. This is different to a normal EU VAT registration as it provides for VAT due in every member state to be reported and paid through a single return.
2. On these consignments below €150, the seller can instead use simplified customs declarations which requires about 1/3 of the data needed for normal declarations. Please note, that the duty exemption for consignments less than €150 is expected to remain in place.
3. A further alternative for consignments less than €150 would be for the postal service/ courier to act as the declarant (as in 2 above), collect the import VAT from the customer and pay it to the relevant tax authority on a monthly basis.
4. For consignments greater than €150, normal customs declarations and payment will be required (either by the seller or its agent – including postal service). Duty will also be payable.
5. Finally, in certain circumstances, EU marketplaces facilitating sales to EU consumers (such as Amazon) will become responsible for the VAT on the third party supplier’s behalf so if selling products through such marketplaces, the VAT will be taken care of at the point of sale by the marketplace provider.

If the goods will be shipped to the UK from outside the EU (or to Great Britain from EU member states)

From 1 January 2021, the current low value consignment relief for imported packages with a value less than £15 is being abolished. As such, UK VAT will be due on all consignments regardless of value. However, for consignments less than £135, relief from duty is available.

As such, there will be an option to import multiple low value parcels (each less than £135) on a single, combined declaration. As there is no duty, this declaration requires a reduced data set making it less detailed than a full declaration.

You can find further details of this bulk import rule and apply to use it at .Gov here.

Consignments with a value greater than £135 will be subject to VAT and duty (if applicable) and normal customs declarations. If the seller is the importer of the goods into the UK, it will need to register for UK VAT in order to declare and reclaim import VAT and account for VAT on local sales. Alternatively, arrangements could be made for the customer to import the goods itself.

If the goods will be shipped from an EU member state

If a UK company holds stock in an EU member state for sales, it will be obliged to register for VAT in that member state as is currently the case.

Sales to customers in that member state will be subject to VAT and any sales to non-EU customers (such as to Switzerland/ Norway/UK) will be treated as exports and will be zero rated.

In line with the changes outlined above for the UK, changes are being introduced for supplies to EU consumers from July 2021 as below:

January 2021 to June 2021

Existing distance selling rules apply for supplies of goods from the EU to consumers in other member states. These rules require an EU supplier to charge VAT in the country of dispatch unless the supplier makes B2C sales in a calendar year that exceed a certain threshold in any member state (either €35k or €100k depending on the member state). In this event, it must register for distance selling in that member state and account for local VAT when B2C sales are made.

Post July 2021

The above distance selling thresholds will be abolished and B2C sales to EU consumers will be reported via a single One Stop Shop return (‘OSS’) similar to the IOSS mentioned above. This will mean that sellers will have an OSS registration in a single member state and account for VAT at the local rate applicable in the customer’s location in a single return. As with IOSS, payment is made to the Tax Authority in the member state where registered and the funds are distributed across the other tax authorities as appropriate.

In the case where the total annual distance sales are less than €10,000 per calendar year, VAT can continue to be accounted for at the rate in the country of supply.