The EU VAT e-commerce package takes effect on 1 July 2021. It results in changes to the Business to Consumer (B2C) sale of goods between Northern Ireland and the European Union (EU), and the import of 'low value' B2C goods into the EU or Northern Ireland from outside the EU.
Overview of the EU’s e-commerce package
The EU’s e-commerce package introduces changes from 1 July 2021 covering the movement of goods from Northern Ireland to the EU and imports of low value goods (i.e. not exceeding £135) into the EU or Northern Ireland.
The package also introduces new rules for supplies made through online market places, similar to those already applying in Great Britain and partly in Northern Ireland.
Two new IT systems will also be introduced – one for the collection of VAT on imports of low value consignments and the other for the collection of VAT on intra-EU Business to Consumer (B2C) transactions of goods.
Which businesses are affected by the EU’s e-commerce package?
The new rules will impact you, if you:-
- Sell or supply goods from Northern Ireland to non-VAT registered customers in the EU
- Make supplies of goods from the EU to non-VAT registered customers in Northern Ireland
- Send low value goods to the EU or Northern Ireland, from outside the EU and Northern Ireland (including from Great Britain (England, Scotland and Wales))
- Non-EU businesses with goods located in Northern Ireland at the point of sale
These changes also affect online marketplaces that facilitate the sale of goods:-
- That are located in the EU or NI and sold by non-EU businesses to non-VAT registered customers (B2C), in EU and NI
- From Great Britain to consumers in Northern Ireland and the EU
A summary of EU’s e-commerce package, effective 1st July 2021
From the 1st July, there will be a number of changes to the B2C sale of goods between Northern Ireland the EU as well as the import of low value B2C goods into the EU or Northern Ireland from outside the EU.
- A new single EU-wide threshold of £8,818 (€10,000) will be introduced for the B2C sale of goods in the EU. This threshold only applies to sales of B2C goods to and from Northern Ireland. If you send goods from the EU to consumers in Northern Ireland and exceed the threshold, you will have to account for UK VAT in the United Kingdom.
- Online marketplaces will be liable for collecting and accounting for VAT on goods supplied to consumers in Northern Ireland, under certain circumstances
- The EU will remove low value consignment relief on imported goods, which relieves import VAT on consignments of goods of up to €22. Low value consignment relief was removed in Northern Ireland on 1 January 2021 in line with the wider UK reforms
Online Marketplaces (OMP)
- For goods sent from Great Britain to Northern Ireland via an online marketplace that is registered for the Import One Stop Shop IT system (see below), the online marketplace will be liable for payment of VAT on non-excise goods in consignments not exceeding a consignment value of €150 (£135), rather than the seller
- The overseas seller is therefore deemed to be making a zero rated supply to the OMP
- The online marketplace is required to keep records of the sellers’ transactions in sufficient detail to enable tax authorities in the country of the customer to check that VAT has been correctly accounted for. These records should be held electronically for at least 10 years after the year of the transaction
- Marketplaces can opt out of the scheme and the VAT obligations then pass to the delivery company of the seller
Supplies of services to or from Northern Ireland do not count towards distance selling threshold
Implementation of the EU’s e-commerce package is in accordance with the UK obligations under the Northern Ireland Protocol. Please note that the Northern Ireland Protocol only applies to goods and not to services. This means that the UK’s implementation of the EU’s e-commerce package will only apply to supplies of goods in respect of Northern Ireland, so if you supply services to or from Northern Ireland, these will not count towards the distance selling threshold.
Two new VAT e-commerce IT systems
HMRC is also launching two new VAT e-commerce IT systems which will link with the new EU-wide IT systems. These IT systems are intended to help compliance, to reduce the administrative burden on business and to facilitate the collection of VAT across the EU.
Import One Stop Shop (IOSS)
The first system is the optional Import One Stop Shop (IOSS) which will be used for the declaration and payment of VAT on imports into the EU of low value consignments (i.e. not exceeding €150 or £135). If you chose to register for the IOSS system, you will need to charge and account for VAT on these supplies.
For consignments, with a value in excess of £135, the current rules, where import VAT is due, will continue to apply. Please note that the UK IOSS registration portal will not be available for use for the 1 July 2021 launch. Businesses can register in any EU Member State until the UK system is up and running.
One Stop Shop (OSS)
The optional One Stop Shop (OSS) is a quarterly VAT reporting and payment system that allows you to register electronically for VAT in a single member state for all eligible sales of goods across all the EU Member states.
OSS is intended to reduce your administrative burden as you will only have to deal with one administration, even if your sales are EU-wide.
OSS means you can de-register for VAT in the local jurisdictions where you may have registered as a result of exceeding distance selling thresholds in the past. If you hold stock in countries outside the UK you will need to remain VAT registered in these countries.
Get in touch with the VAT team at DRG Chartered Accountants
The new rules are complex with further updates expected in the near future. If you have any questions, please do get in touch with our VAT specialists at DRG Chartered Accountants. We would be very pleased to hear from you.
For further information
Gov.uk website: Changes to VAT treatment of overseas goods sold to customers from 1st January 2021
Gov.uk website: EU VAT e-commerce package
Brexit: Update on new VAT arrangements – DRG article updated on 13th January 2021
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.