By Alexander Maasik
This year, new regulations for trading between the European Union (EU) and the rest of the world will go into effect. These changes have been in works for years. Yet most people and businesses are not ready for them. You can use Eurora to make sure you can still import goods to the EU.
With these changes, sending goods to customers inside the EU becomes more expensive, slower, and more bureaucratic for both the customers and the marketplaces in China, UK, USA, and rest of the world.
The reason for these changes is to put online stores outside the EU on an equal footing with EU merchants. Also, EU countries have lost significant budget revenue in recent years due to the Low Value Item Tax Exception and mislabeled and mis-declared packages. This loss is only magnified by the e-commerce boom.
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How to pay VAT when sending goods to the EU?
Starting from July 1st, 2021, non-EU online stores will have to pay VAT (Value Added Tax) on all goods ordered by residents of the EU countries.
For low value orders (up to 150EUR), there is a special procedure in place, according to which online stores can pay VAT either by registering in the country or by finding a tax representative in there for themselves. In addition, while the general principle in accounting is that documents must be kept for 7 years, the new regulation, which enters into force, sets the obligation to keep VAT data for 10 years.
The positive side is, that online shops can handle all VAT accounting and payment for all EU countries through the tax administration of one Member State. Meaning you don’t need to be registered in all 27 countries.
Increase in Customs Declarations
Another new and probably the most overwhelming requirement for most logistics companies and customs is that now all consignments must be declared when entering the EU.
Until now, goods that are valued at 22EUR or lower have not required written declarations. And these packages make up about 90% of all goods entering Europe.
Thus, an insane increase in the number of customs declarations is expected from July, and in many countries, customers must start paying for the services of a customs agent every time they order any small item
What is more, right now, the declaration process starts when the goods reach the customs. If the same practice continues, the huge number of declarations mean that goods will pile in warehouses of postal and courier companies. And that will slow the process even more.
Even now, customs officials have had to physically inspect a substantial number of consignments to check their true value. Such controls cannot be effective under upcoming regulations. For the system to not fail, application of technology is the key issue.
Marketplaces Cannot Handle it Alone
Given that the online store must be aware of the tax rates and import restriction in different countries in the EU, it is not very realistic for overseas online stores to be able to implement these requirements quickly and correctly.
In the future, every EU consumer must be able to see information on taxes for goods added from online shopping cart, online shops will have to start calculating VAT based on each product’s category and country of destination. This cannot be done if the respective databases are not comprehensive and up to date.
Luckily, Eurora can easily help both marketplaces and carrier with these regulations. As our intelligent cross border compliance platform has been tailored to handle all the new rules. Eurora’s Duty and Tax calculator is up to date with trade rules for most countries. And our electronic declaration service helps to make sure, all the paperwork is in order.
Main Changes in the Taxation of E-commerce from July 1st, 2021
- Non-EU online shops will have to pay VAT on all shipments ordered to the European Union. The tax exemption for consignments of less than 22 euros will be abolished.
- The tax liability of the special scheme arises at the time of sale (no longer upon importation of the goods).
- A non-EU online store must be a taxable person established in the EU or appoint a special VAT representative and apply for a VAT registration number.
- VAT data is transmitted through a single tax authority to the EU Member States where consumers ordered the goods during the declared period.
- VAT is reported monthly. So-called zero reports must also be submitted.
- To prevent misuse, the VAT registration number of online stores must not be published (meaning, this number may not be shown on invoices).
- All consignments must be the subject of a simplified customs declaration.
- Online shops and their agents must keep VAT records on their transactions for 10 years.
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