Effective July 1, 2021, Value Added Tax (VAT) will be charged on all commercial goods imported into the EU, regardless of value. Previously, imported goods shipped to EU buyers valued at €22 or less were exempt from VAT. Going forward, VAT will be charged for import consignments valued at €150 or less. If the seller does not collect the VAT at the point of sale, the buyer will be responsible for the VAT and will be charged additional fees by the carrier at the time of delivery, unless already collected by the online marketplace (Amazon, eBay, or Etsy). The buyer’s delivery address determines the country-specific VAT rate. For imports valued at €150 or more, regular duty and tax rates still apply.
**Taxes are complicated and different for everyone. While we provide information related to taxes in this post, we highly suggest you consult with your tax advisors to determine the correct actions for your specific situation.
Value-Added Tax (VAT)
Value-Added Tax (VAT) is a tax commonly assessed throughout the UK and the EU on goods originating from outside of the destination country. VAT can be applied to a product repeatedly at every point of sale at which value has been added. VAT is commonly expressed as a percentage of the total cost. For example, if a product costs $10 and there is a 15% VAT, the consumer pays $11.50 to the merchant. The merchant keeps $10 and submits $1.50 to the tax authority in the destination country.
Selling on an Online Marketplace
Online marketplaces where the sale takes place (such as Amazon, eBay, or Etsy) will be responsible for collecting and accounting for the VAT. In this case, the online marketplace becomes the supplier, not the shipper. So, the individual shipper won’t have to register and account for the EU VAT that is due. Check whether or not your eCommerce platform facilitates these payments. *Note: You will still need to enter the IOSS number (assigned to Amazon, eBay, or Etsy) on your customs documentation and can contact your specific marketplace for this information.
When shipping using DDP-Delivery Duty Paid
If you ship DDP (Delivery Duty Paid), using a carrier such as FedEx, UPS, or DHL, you do not need an IOSS VAT number. Your carrier will bill you for the tax on a per-shipment basis. You may still need to collect the fees from your buyer upon checkout.
Registering for a VAT Number through Import One-Stop Shop (IOSS)
The IOSS facilitates the collection, declaration, and payment of VAT for sellers who sell goods outside of the EU to buyers in the EU. This would apply to shipments with a value that does not exceed a total of €150 and are not subject to excise duties (which are usually applied to alcohol or tobacco products). The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase, and therefore does not face any surprise fees when the goods are delivered. Using IOSS is optional. However, if you choose not to use IOSS, import VAT will still have to be collected. In such a case, the recipient will be charged additional fees by the carrier at the time of delivery. To prevent your EU-bound shipments from being delayed, held, or returned by EU customs it is recommended to use the IOSS system. If you want to use the new IOSS system, you can register on the IOSS portal of any EU-member country, but if your business is based outside of the EU, you will most likely need to use a local tax authority or a commercial tax company such as Avalara to facilitate your VAT obligations for IOSS on your behalf. You will then receive a VAT number to use for all transactions that fall under the IOSS rules.
Summary
Your formal customs declaration will now require more information about the items you are sending. Pro forma and commercial invoices must provide clear and accurate data including a description of goods, the number of items, itemized values, and custom tariff codes. It is also recommended that you provide an accurate product description and HS Code.
You do not need to charge VAT if you sell several goods to the same buyer, and these goods are shipped in a package amounting to more than EUR 150. These goods will be taxed at importation in the EU Member State.
Where to enter the VAT number in XPS Ship
When applicable you will need to enter the IOSS number when creating your shipment to avoid the shipment being delayed or your buyer from being charged the VAT and additional fees. Visit the Help Center link: VAT Number Field for International Shipments
Additional Resources
Do I need to be registered for VAT? Avalara VAT Risk Assessment tool
VAT rates in the EU European Commission website