• Date

    29 Jun 2021
  • Category

    VAT & Indirect Tax, Tax

Important VAT Changes from 1 July 2021

On 1 July 2021, significant changes will be made to the rules that apply to the VAT and duty treatment goods sold and shipped to customers in the European Union (EU).  These reforms primarily target business to individuals and e-commerce transactions and they will affect both businesses and online shoppers.  They may also impact business to business ‘B2B’ imports and those operating the tour operators margin scheme and flat rate schemes.

If you supply goods or services into the EU, you need to confirm how the following changes affect your business.

‘Distance Selling’ Regime

Historically, supplies of goods to individual ‘consumers’ (B2C supplies) in the EU were recorded and accounted for in the country the goods were dispatched from.  This meant UK VAT was normally charged and accounted for on goods that were supplied by UK businesses to EC customers.  Under ‘distance selling’ rules once specific sales values in each EU Member State were exceeded, a local VAT registration was required and UK suppliers had to charge and account for VAT in affected countries. These rules ceased on 1 January 2021 when the UK left the EU. From 1 July 2021 the historic distance selling rules and thresholds will be replaced by an EU-wide value of €10,000.  This applies to sales of goods and electronically provided services.  

From 1 July 2021 when goods valued above €150 (there are specific rules for goods with a value less than €150 - see below) are sold by a UK company to individuals in different EU countries and the transport is arranged by the supplier, a new VAT accounting procedure applies. 

The new rules move the place of supply to the country the goods are supplied in and will result in more suppliers having to register and account for VAT in other EU countries.  From 1 July 2021, affected businesses can use a new One Stop Shop (‘OSS’) VAT accounting procedure to account for VAT overseas and avoid the need to register in different countries.

One Stop Shop (OSS) Regime

Historically the Mini One Stop Shop (‘MOSS’) online accounting system allowed those supplying telecommunications, broadcasting and electronic (‘TBE’) services to consumers in the EU to declare and pay the VAT due in other EU Member States centrally on one VAT return.  EU based businesses, registered and accounted for MOSS in their country of residence.  Non-EU based businesses were free to choose a Member State as a base for their registration, notification and reporting.  To date participation in MOSS has been voluntary however the only other option was to directly register and account for VAT in other EU countries. 

Changes from 1 July 2021

From 1 July 2021 the MOSS accounting procedures have been extended to cover all business-to-consumer (B2C) services taking place in EU Member States where the supplier is not established in that country.

The revised OSS procedures can now be used to record and account for VAT on sales of goods to individuals within the EU and supplies of goods made through electronic interfaces in certain conditions.

The ability to use OSS procedures will be possible if the business is required to be registered for VAT in more than one EU member state. OSS procedures must be used by each supplier uniformly across the entire EU.

OSS declarations or returns must be submitted quarterly however the deadline for submitting declarations via OSS, (as well as the due date of the tax liability), has been extended by 10 days compared to MOSS returns.

A special registration number is required to participate in OSS procedures and this can now be applied for.  Businesses already using the MOSS procedure automatically participate in the OSS regime.

A new OSS procedure has also been created for the declaration and payment of VAT on EU sales of low value goods that are imported from outside of the EU (the UK).  This is called the Import One Stop Shop (IOSS).

IOSS Platform for imports up to €150

The IOSS platform is intended to simplify the declaration and the payment of VAT on B2C supplies that have a value that is less than €150. Registering for the IOSS platform is not obligatory and suppliers can continue to declare and pay VAT on EU imports according to current arrangements if this is preferred. Most goods that are valued at less than €150 will continue to be exempt from customs duties. 

Using a single IOSS registration in one EU Member State, the IOSS platform can be used to record and account for VAT on sales throughout the EU.  This removes the need to register and account for VAT in every EU country in which goods are sold.

Using IOSS, non-EU suppliers can record the point of sale, and declare and pay the VAT due in EU countries on a single periodic VAT return.  Shipments of IOSS goods with a valid IOSS number will not be subject to import VAT, and this could help them move through customs procedures quicker.

If your company does not have an EU-based establishment and you want register for the IOSS, you may need to appoint an overseas representative to settle VAT through the IOSS platform.

Removal of the €22 VAT exemption for imports

The VAT exemption that currently applies to goods imported into the EU with a value up to €22 will be removed on 30 June 2021.  From 1 July 2021 these supplies will be subject to VAT and will require formal customs clearance, although most goods that are valued at less than €150 will continue to be exempt from customs duties. 

Suppliers must ensure that they produce an accurate commercial invoice to reduce the risk of customs delays.

Checklist to prepare your business for the changes:

  • Confirm which areas of your business are impacted by the new EU VAT rules.
  • Assess your VAT accounting needs for the EU: Systems and master data updates are likely to be required to identify and apply the appropriate VAT rates in different countries.
  • Consider registering for the IOSS platform if you want to use a single registration to pay VAT throughout the EU for B2C shipments up to € 150.
  • If you do not have an EU-based establishment and you want to register for IOSS, you may need to appoint an intermediary to ensure tax compliance on your behalf in the EU.
  • Review and cancel existing foreign EU VAT registrations if you want to replace these with a single IOSS registration.
  • If you sell through an online marketplace, contact them to confirm who is responsible for accounting for VAT on your B2C shipments up to €150.
  • make any necessary updates to your shipping system and procedures.
  • If you plan to pass on import charges to your consignee, make sure you inform them of this in advance.

If you require further information or assistance to prepare for these changes, please contact your local Azets representative or a member of the National VAT team.

About the author

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Andy Dawbarn

Partner London
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