How the EU's VAT Tax Changes
Impact Small Businesses
Beginning on July 1st, 2021, the EU enacted new regulations surrounding tax collection and tariff labels. It aims to “simplify VAT obligations” for all goods and services sellers.
The VAT rules on cross-border business-to-consumer (B2C) e-commerce activities have changed. The rationale for these changes is to overcome the barriers to cross-border online sales and address challenges arising from the VAT regimes for distance sales of goods and for the importation of low value consignments.
Everyone in the e-commerce supply chain is affected, from online sellers and marketplaces/platforms both inside and outside the EU, to postal operators and couriers, customs and tax administrations, right through to consumers.
- All goods priced up to €150 will be subject to the VAT. This contrasts with the previous rule that exempted items priced under €22 from the VAT. Items priced above €150 were already subject to VAT and will not see any change in regulations.
- Services such as “Import One-Stop Shop” (IOSS) that assist in collecting the VAT are expected to be required for sellers in online markets.
- Businesses should begin collecting the VAT on all goods sold for up to €150. IOSS or third-party shippers such as Fed-Ex and UPS may be used by sellers to easily charge VAT. In reference to tariff codes, business can find the corresponding codes for their products via tools from the European Taxation and Customs Commissions and the U.S. International Trade Commission.
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