VAT rules are catching up with the growth of ecommerce to the European union with simplified rules and levelling the playing field between postal imports, commercial imports and EU sellers. The new rules, effective July 1st, actually present a great opportunity for Canadian and US sellers shipping to Europe (and the UK). Over 70% of EU population purchase online and many search for Canadian goods.
The EU has recognize the need to recognize all 27 member countries as a single digital marketplace. The current rules - and misuse of the current rules - have resulted in significant lost tax revenue and loss of sales for local EU merchants and marketplaces.
A short history of ecommerce to the EU
Basically, there has been an explosion of ecommerce shipments from Asia to Europe that were imported duty free using under-declared values. The €22 threshold, which was established to enable simple clearance of gifts and samples, was being misused as a way to avoid paying VAT for online orders.
Member states where given with a lot of discretion with regard to low value imports which resulted in unequal treatment and unfair advantages. Under valued consignments ecommerce orders were imported without VAT or duty and then transited throughout the EU for delivery. Furthermore, the technology used by some member states were manifest based making targeting and enforcement difficult.
No Postal Clearance Advantage to France and EU
For many Canadian and US sellers, shipping via postal packets was the best option as "postal clearance" offered advantages. The new rules are designed to enable better risk analysis by mandating compliance for both postal and commercial carrier clearance. The uneven playing field and being able to take advantage of lax customs oversight was not sustainable.
IOSS to France and EU is not Mandatory:
The Import One Stop Shop / IOSS regiment is not mandatory.
- IOSS: Vat is collected at time of online purchase. Marketplace Deemed supplier. Voluntary. Once an operator is registered, they have to apply the scheme for all their shipments up to 150 euros.
- VAT remains to be collected at importation.
- Special arrangements based on existing customs processes but only used in for consumer in each market.
- Standard VAT collection remain from consignee
What does not change on July 1st for shipments to the EU?
- There is no change in duty, only VAT. Goods valued over €150 are still subject to duty. Keep in mind that Canadian origin goods may qualify for duty free import under CETA (contact our team for details).
- IOSS is only for business to consumer sales. Business to business shipments import processes remain the same.
- Additional things to know about IOSS and shipping ecommerce to Europe
- If you register for IOSS, then all your shipments must be sent using this IOSS processes
- Only one IOSS is needed when importing to all EU members
- Non EU companies need to appoint an intermediary to register on their behalf
- Security of IOSS number. It is important to protect your IOSS number and monitor potential fraud.
- Data quality is important with using IOSS including transparency in reporting VAT collected and paid. It is recommended to show VAT breakdown for consumers.
Adjustments to EU customs processes and legislation:
In addition to tax revenue collections, the dramatic increase in shipments has given rise security concerns. New "7+1 processes" and preloading security and risk analysis have been implemented. These requirements will be expanded from express and postal consignment via air to other methods of import (namely, ocean).
Excise Tax to EU and IOSS:
Important to note that goods subject to excise goods (such as alcohol) are excluded. VAT and excise remain to be collected at border
What are Exemptions to EU Ecommerce Imports?
No EU member state is exempt. All 27 members will be subject to the new regulations.
Responsibility=Greater Ecommerce Opportunity from USA and Canada to the EU
The EU (and UK) represent incredible opportunity for North American online sellers. Having clarification of rules and being able to register and manage VAT using one point of access is incredible. Small merchants using eBay and other online marketplaces can easily have their customers prepay VAT and have their shipments delivered without further import fees.
Opportunity for Panier Bleu sellers to France via prepaid VAT:
Jet Worldwide has developed direct import processes to France that includes payment at VAT at time of import with no charges to the consignee.
Steps for Registering for Import One Stop Shop:
- Register with an EU Fiscal Representative: Marketplaces and direct to consumer sellers outside the EU must appoint an EU fiscal representative.
- Obtain an IOSS VAT ID Number: Note, although not necessarily confidential, sellers should beware of fraud and potential misuse of this information.
- Show the VAT rate and total due at check out : This transparency also meets the requirements related to consumer protection.
- VAT collected by seller: The buyer pays the VAT due at checkout (point of sale).
- VAT and IOSS part of Data set required by EU customs: The required advance data /EAD sent to the national customs authority prior to shipping includes the IOSS VAT ID number.
- Monthly report and payment: The suppliers EU fiscal representative must submit an electronic VAT return on behalf the supplier along with payment.
- Data storage: The data must be digitally stored for 10 years