The global pandemic we have been facing significantly developed online shopping and changed our consumption habits. As a consequence, many consumers won’t go back to stores as they did before but rather purchase goods online.
Not only online purchasing surged, but also cross-border trade. An increasing number of customers buys goods coming from other countries. In 2020, 21% of the goods Europeans purchased online came from non-EU countries. This trend is expected to intensify in 2022, so if you are an online retailer, you shouldn’t miss the opportunity to sell your goods abroad.
In this context, international trade compliance is the key to ensuring you deliver your goods on time, and satisfy your customers. As an eCommerce business, you don’t want to lose money or let your competitors get all the shares. That is why you should always be up to date on cross-border regulation changes.
IOSS, EU VAT, UK VAT, HS2022, Post-Brexit regulations: these are terms you should be familiar with if you want to comply with distance selling regulations this year.
Whether you are planning to sell your goods in the EU, to seize the UK market after Brexit, or to expand globally, here are some regulations coming into force in 2022 you should know about.
Major changes in VAT registration
Last year marked an important change for EU VAT. We are now familiar with the new EU trade regulations and the IOSS portal created to help businesses comply with those new VAT regulations. 2022 won’t be more restful as the European Commission plans to make further changes on EU VAT.
First, let’s go back to the changes that occurred last year. From July 2021 sellers must collect VAT on all goods that they sell to EU customers and calculate the VAT rates as each EU country has its rate. In addition, The Low-Value Item Exemption has been abolished. This means you must declare in customs all goods entering the EU regardless of their value. To help businesses cope with those new requirements, the EU created the Import One-Stop-Shop (IOSS). The IOSS platform facilitates the VAT registrations as you don’t have to register in each state separately. However, non-EU businesses must hire an intermediary to complete the IOSS registration on their behalf.
Eurora is the EU’s first official VAT Intermediary and can represent your eCommerce platform in all 27 European Member States.
Now let’s jump into 2022 changes. The European Commission agreed on new EU VAT rates for goods and services that will most likely come into force in the first half of 2022. EU VAT rates are almost 30 years old. This is therefore a significant upcoming modernization. Current VAT regulations are restrictive and leave little room for each Member State. The EU thus plans to grant more flexibility in the way each state can apply reduced VAT. It will be possible to apply up to five different VAT rates, including a zero rate per member state.
This is good news for the Member States, but sad news for eCommerce platforms that import their goods into the EU. More than 200 different VAT rates could be applied inside the EU. You would have to take into consideration all those VAT rates in addition to this year’s new VAT regulations. In this context, it seems more and more difficult for eCommerce platforms to deal with VAT regulations on their own.
Eurora can help you deal with VAT registration and ensure your Fiscal representation. Check out how our tax specialists can help you!
One year ago, the United Kingdom left the EU single market and customs union. Therefore, from 2021, the UK VAT is managed separately by the HM Revenue & Customs (HMRC). These new VAT rules created new confusions for businesses, thus the HMRC didn’t strictly enforce it in 2021. In 2022 however, the HMRC will make sure businesses meet those new requirements. So, if you plan to continue selling your goods in the UK, you should know about UK VAT rules.
As a non-UK company, you must declare your imported goods with HM Revenue & Customs (HMRC) and pay VAT for all goods valued at £135 or less. If you don’t collect VAT from your customers, you must pay it out of your pocket.
To help businesses handle these new regulations, Eurora has developed a VAT Agent Service. With it, we offer fiscal representation for the companies wishing to stay compliant with the UK rules. This VAT Agent Service is for all non-UK businesses that sell goods with a value of £135 or less in the UK. It offers a wide range of benefits from VAT number registration to representation with the HMRC.
Eurora will also take care of all your tax return submissions and help you make all the required tax payments. Also, Eurora will represent you in front of the HMRC. We make sure you are 100% compliant with all the UK tax regulations.
Do not wait to take over the UK market, register for UK VAT!
HS2022, the brand-new edition of HS code allocation
What is HS (Harmonized System)?
The World Customs Organization (WCO) enforced the new Harmonized System (HS2022) nomenclature on 1st January 2022. This Harmonized System code (HS code) is used worldwide and makes sure that the goods traded internationally are uniformly classified. HS codes cover more than 98% of goods. They are classified into commodity groups thanks to an internationally uniformized 6-digit code. With this 6-digit code (HS-6 code) customs offices can determine duty and tax rates for goods that enter a country easily.
This means that if you do not update commodity codes on your goods after January 1st, they will be stuck at the border.
What changes with the new HS code system?
HS2022 implies major changes in a wide range of goods traded internationally with a total of 351 sets of amendments. Those changes consider new environmental and social challenges that cross-border trade created:
- Product classes presenting policy concerns and high trade value, like electrical and electronic waste, have specific classifications to assist countries in their work under the Basel Convention.
- Novel tobacco and nicotine-based products which are hard to classify but have a very high monetary value also benefit from new provisions
- Drones have specific provisions to simplify the classification of these aircraft.
- Smartphones which are multifunctional devices have their subheading for clarification purposes
Eurora’s automated HS Code Allocation service is already ready for HS2022 updates. We can automatically and quickly assign the correct HS code on parcels you ship.
Post Brexit regulations coming into force
As we previously mentioned, the United Kingdom left the EU single market and customs union one year ago. This led to major issues for companies that were not ready for new customs regulations. As a result, the HM Revenue and Customs (HMRC) granted some flexibility throughout 2021. However, from 1st January 2022, this transition period is over. New cross-border regulations will be strictly enforced.
New customs declarations requirements
If you are an EU-based eCommerce business and you sell goods to the UK, starting from 1st January 2022 you must complete customs declarations on all goods at the time you import them into the UK. You cannot delay customs declaration by up to 175 days anymore.
You must abide by this new custom clearance process and complete your customs declaration with the correct country code. The EU country code cannot be used for UK imports anymore and will be removed from the systems. All goods coming to the UK will be strictly controlled, so if you do not have a valid declaration and customs clearance, they will be blocked.
You can apply to Simplified Declarations for imports, but you will need an authorization and a Duty Deferment Account.
Introduction of rules of Origin between EU and UK
Rules of origin determine the national source of a product exported internationally. When the UK was still part of the EU customs union, there was no need to bother with that if you were trading inside the EU. However, Brexit changed distance selling regulations. After a 1-year grace period, those regulations came into force on 01st January 2022.
The UK and the EU established a Trade and Cooperation Agreement (TCA) that sets preferential trade arrangements. This means if you are an EU eCommerce business trading with the UK, you can benefit from zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.
You should therefore make sure that your goods meet the rules of origin to benefit from this agreement. If you cannot prove the origin of your product, your EU customers will be liable to pay the full rate of customs duty. You could also face penalties.
You can check if your goods meet the rules of origin on the UK’s government page.
Eurora can save you from this hassle with its Automated Customs Clearance service. We can provide companies with automated custom declaration processes for H7 and H1 declarations for the entire EU & UK market.
Eurora’s end-to-end compliance solution
Eurora has been one of the first companies in the world to register as a Fiscal Representative and offer you the IOSS services. Last year, we helped our customers go through all the new cross-border regulations smoothly and made sure they could sell their goods in the best possible conditions. We will continue to assist you with all the new regulations coming this year as we constantly adapt our services to distance selling regulation changes.
Eurora offers a wide range of services from UK VAT Agent service, IOSS, HS Code Allocation, Electronic Declarations, Duty & Tax Calculations to Fiscal Representation.
If you want to bring your cross-border sales to the next level, get in touch with us!