EU: VAT rules affecting e-commerce sellers and marketplaces effective beginning 1 July 2021

Removal of the exemption from VAT for “low-value” goods

Removal of the exemption from VAT for “low-value” goods

The European Union (EU) has introduced reforms to the value added tax (VAT) rules that will affect business-to-consumer (B2C) e-commerce sellers and marketplaces as of 1 July 2021. With removal of the exemption from VAT for “low-value” goods, all commercial goods imported into the EU will be subject to VAT (to be imposed at the applicable VAT rates in the country where the goods arrive). 

In general, VAT can be collected on these transactions under one of two methods:

  • Import VAT collected upon importation, with the customs declarant paying the VAT and then recovering it either from the customer or the supplier.
  • The supplier registers for the “import one-stop shop” (IOSS) and collects VAT from the customer at the point of sale. If the IOSS is used, import VAT is not due at the time of importation.

IOSS regime

IOSS is a new system for reporting and collecting VAT on B2C sales of low-value goods imported from non-EU countries. It is intended to simplify the customs clearance and import procedures for “low-value goods” (defined as goods with a value, not including separately stated transportation costs and VAT, not exceeding €150, but excluding some products subject to consumption tax (such as tobacco and alcohol)). For these purposes, the value of the product is calculated as the total of the value of all the products in a single package.

The use of the IOSS regime is voluntary. However, if the IOSS regime is applied, benefits include:

  • Transparency to the customer: At the time of purchase, the customer will see the total cost of the goods and pays a VAT-inclusive price.
  • Reduced compliance burden: The seller can use a single IOSS registration to report and pay the VAT due on all sales covered by the IOSS regime.
  • Quick customs release: The IOSS is designed to enable the quick release of the goods by the customs authorities because no VAT is payable upon importation.
  • Flexible logistics: Using the IOSS regime can simplify logistics because the goods can be imported into the EU in any EU Member State, regardless of the EU Member State where the goods are ultimately shipped to. If the IOSS regime is not used, goods can only be imported and cleared for customs in the EU Member State of final destination, and incurring possible additional costs.

KPMG observation

Swiss sellers register for the IOSS regime only through a VAT intermediary that is a resident in the EU. Once registered, the Swiss sellers are to submit monthly IOSS returns and remit the amounts of VAT to the country of registration on a monthly basis. The tax authority in the country of registration will then distribute the appropriate amounts of tax to the other EU Member States according to the IOSS returns submitted. The VAT intermediary will be responsible for submitting monthly IOSS returns and making VAT payments on behalf of the sellers.

Read an April 2021 report prepared by the KPMG member firm in Switzerland



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