New EU wide VAT rules for business to consumer sales of goods from 1 July 2021

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Following the UK’s exit from the EU, the distance selling requirements for businesses selling goods business to consumer (B2C) from the UK no longer apply and all sales of goods to overseas customers are exports from the UK.  However, from 1 July 2021, new EU wide rules come into effect, which will alter the VAT treatment of the B2C trade in goods throughout the EU, by extension of the existing Mini One Stop Shop.

What do the new VAT rules mean for businesses?

The new rules allow a business to opt to register in one EU Member State and file a new One Stop Shop (OSS) VAT return, in order to account for VAT on all B2C sales of goods throughout the EU.  Non-EU sellers, now including the UK, may also apply to use the OSS regime, being permitted to register in any single EU Member State under the Import One Stop Shop (IOSS), for the import and sale of goods throughout the EU.  The new regime avoids the need to potentially register in multiple EU Member States, for the sale of goods to consumers located there.

The low value threshold for individual consignments of goods imported into the EU will also be increased to €150, below which no import VAT or duty will apply and VAT will only be due at the point of sale.  Consignments over €150 will be subject to the normal rules for import, subject to import VAT and duty, as applicable.

In theory, the OSS and IOSS will facilitate the collection, declaration and payment of VAT, for sellers that are making distance sales of goods to consumers in EU Member States.  It will also mean that the buyer will only be charged at the time of purchase and will therefore not incur any unexpected charges when the goods are delivered.  In a case where the seller is not IOSS registered, the customer may have to pay import VAT and possibly other customs clearance charges.

Pre-registration for both the OSS and IOSS has been live in some EU Member States since 1 April 2021, through an online portal.

For further information and assistance with registration, please contact a member of the VAT team.

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