New EU VAT rules for e-commerce businesses trading into Europe
There are less than two weeks left until the new EU VAT laws come into effect for e-commerce businesses trading B2C into Europe. Radical changes on 1st July are a further challenge for UK businesses already reeling from Covid-19 restrictions, post-Brexit administrative burdens and international supply chain issues.
UK businesses selling to the EU
UK businesses selling and delivering goods to consumers in the EU are required to register for VAT for goods sold unless the consumer acts as the importer. The backlash from UK consumers complaining about delays and extra costs when the UK bought in similar rules on 1 January this year, is not one that UK sellers will want to repeat with their EU customers.
Lost revenue through VAT due to under-valuation of imports has long been a problem. With cross-border e-commerce continuing to accelerate and set to break the $1 trillion mark in 2022 and the EU wanting to tax this revenue, the overarching principle of the new VAT rules is to collect VAT on goods and services by reference to the place where the customer belongs, forcing UK sellers to declare VAT at the point of sale. This means businesses need to build EU VAT rates and not UK VAT into their websites ready for 1 July.
To mitigate the daunting prospect for UK businesses to register for VAT in all European member states where their customers are based, the EU has introduced two new schemes to make the VAT compliance process and collection easier:
- Import One Stop Shop (IOSS)
- One Stop Shop (OSS)
Both will result in businesses completing one return for all EU sales. These regimes are in addition to the existing Mini One Stop Shop (MOSS) which deals with digital services.
