With the UK now out of the European Union, British businesses are having to reconsider the tax implications of their transactions with their European customers. The UK’s departure from the EU single market will have a number of consequences for sales made via the internet, and companies must be aware of this in order to avoid any potential pitfalls.
If your company plans to continue selling goods to consumers in EU member states via online platforms such as Amazon and eBay post-Brexit, it is your responsibility to keep track of how these rules are changing, and to make sure you are paying what is owed under the new regulations.
What are the post-Brexit rules on VAT for online sales?
Once the UK’s Brexit transition period comes to an end on December 31st 2020, British companies selling goods online to EU countries will no longer be able to register for VAT under the distance selling rules in other EU member states. This means that any current distance sales VAT registrations applicable for EU countries will become invalid for British businesses, and goods sent from the UK to EU end consumers will instead become subject to VAT and duty at the point that they clear into the EU from the UK.
There are certain exceptions to this: from January 1st to July 2021, if the individual consignment sent to a consumer is valued at less than €22, this will benefit from low-value consignment relief (LVCR) and be cleared into the EU free of VAT and duties. Any consignments above €22 will attract import VAT but not duty, provided the consignment value is less than €150.
From 2021, LVCR relief will be withdrawn, and an extension to the VAT MOSS system is expected to be introduced for goods imported from outside the EU by end consumers into European countries where the consignment value does not exceed €150. This is likely to result in suppliers being required to submit and pay VAT returns at the rate applicable in the member state where their customer is based, via the non-EU MOSS system currently used to account for VAT on supplies of e-services to consumers.
From July 2021, British companies selling goods to consumers in EC countries will be able to opt to use the new One Stop Shop (OSS) VAT accounting system. This will require the British supplier to nominate and register for VAT in a single EC country and complete and file a new OSS return for sales to EC consumers. This will be subject to a maximum limit of €150 per consignment to a single consumer.
Additionally, where OSS is not used, an alternative scheme will be made available that allows the individual who presents the goods to customs - such as the freight forwarder - to report and pay the VAT on behalf of the customer.
When do these rules apply?
The options outlined above will only be available in specific circumstances, specifically applying to:
- Consignments with a value of less than €150 supplied to the customer up to July 2020. Where the consignment value is more than €150 import, VAT and duty will still need to be paid when the goods come into the EU at the point of entry
- Delivered goods being sent from the UK to the end consumers or customers
Where goods are warehoused and sold in an EU country by the UK supplier, or the goods are imported in the name of the supplier, the UK supplier will still be liable to register and account for VAT in that country.
Additional considerations when trading on digital platforms
The EU will be implementing measures that impact businesses selling to consumers in the EU via online marketplaces and platform operators. From July 1st 2021, online marketplaces will become the deemed supplier for VAT purposes and liable to account for VAT in the EU when non-EU sellers use their sites to sell the following:
- Goods up to a value of €150 sold on their platforms
- Any goods sold on their platform where the seller uses EU-based fulfilment centres
These measures will require non-EU sellers trading on these platforms and marketplaces to be responsible for the importation of the goods into the EU and to pay import VAT, and then account for the onward sale to the platform operator via the OSS system.
As a result, it is likely that UK businesses trading on such platforms will undergo close scrutiny by the platform operator or marketplace business, and will be required to prove they are compliant if they wish to continue to trade on these sites.
Find out more
As with many current guidelines and rules, these regulations remain subject to change as the UK continues to negotiate the terms of its post-Brexit relationship with the EU. As such, it is vital for businesses to keep themselves informed and updated on all of the latest developments.
If you are involved in distance sales or export goods to the EU and are seeking further advice, please contact our free VAT helpline on 0333 3638 012, or read more about our dedicated Brexit advice service.
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