We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
VAT rules on crossborder business-to-consumer (B2C) e-commerce activities between Northern Ireland and EU changed on 1 July. Discover the main changes.
Distance selling
If you sell goods from Northern Ireland to consumers in the EU and go above the distance selling threshold, you’ll need to pay VAT on these sales in the country the goods are sent to. This could mean you’ll have to register for VAT in up to 27 EU countries.
The existing thresholds for distance sales of goods within the EU has been abolished and replaced by a new EU-wide threshold of €10,000 (£8,818). This threshold will apply to the total crossborder sales by the business across the EU and not, as at present, on a country-by-country basis. Below this €10,000 threshold, the supplies of telecommunications, broadcasting and electronic services and distance sales of goods within the EU may remain subject to VAT in the member state where the taxable person is established.
To ease the administrative burden of businesses having to register in each EU member state where they have customers, there will be a new opt-in online One Stop Shop (OSS) quarterly VAT reporting and payment system. This means that businesses falling in scope of the new rules will no longer be required to VAT register in each of the EU member states of their customers.
A business opting to register for OSS will be able to do so once in any EU member state or in the UK, provided that it is VAT registered in the EU member state or is trading with the EU under the Northern Ireland Protocol.
Once registered for OSS, the business must account for VAT on all its distance sales through that OSS. Businesses exceeding the £8,818 threshold that wish to use the UK’s OSS will be required to register for VAT in the UK if they are not already registered and will require an XI indicator. The requirement to VAT register will apply even if the overall turnover is below the normal UK VAT registration threshold of £85,000.
If you register for UK VAT so that you can use the OSS Union scheme, you will not need to account for VAT on domestic sales until you become liable under the normal rules. Further guidance on this will be made available soon. A UK VAT registration is not required if the supplier registers and accounts for the VAT in each EU member state to which the goods are dispatched.
Exemption for the importation of goods with a value not exceeding €22 has been removed but businesses can register for the Import One Stop Shop (IOSS) (if the transaction is below €150).
This means all goods imported in the EU are now subject to VAT.
A new special scheme for distance sales of low value goods (not exceeding EUR150) imported from third territories or third countries was created. The IOSS has been created to simplify the declaration and payment of VAT. This means that businesses falling in scope of the new rules in respect of EU and Northern Ireland imports will not be required to register for VAT in each of the EU member states of their customers. Find out how to tell HMRC your IOSS registration number.
Online marketplaces and imports
Changes also affect online marketplaces (OMP) importing goods into the EU and Northern Ireland. The UK partly implemented this for imports into Northern Ireland from outside the UK and the EU from 1 January 2021.
An OMP that is registered for the IOSS will be liable to account for the supply VAT on imports of low value goods into the EU and Northern Ireland under the scheme rules. For imports into Northern Ireland, where the OMP has not opted to register for IOSS, import VAT will continue to be collected in the same way as it is now.
Businesses making sales through an online marketplace that is not registered for IOSS have the option to appoint an EU established intermediary to represent them and to account for VAT on their sales through IOSS. Alternatively, where an intermediary is not appointed and IOSS is not used import VAT will be due on importation as it is now.
Online marketplace liability will not apply in relation to Great Britain businesses that make sales of goods to Northern Ireland customers.
Online marketplaces and supplies within the EU
OMPs will be liable to account for the VAT on supply of goods located within the EU or Northern Ireland when they sell these goods on behalf of overseas sellers located outside of the EU and Northern Ireland. The online marketplace liability will also apply in relation to Great Britain businesses that make sales of goods located in Northern Ireland at the point of sale for delivery to EU customers, but not customers in Northern Ireland.
The OMP will account for the VAT as though it were a sale by them and where it is a distance sale within the EU the OSS can be used by the OMP to account for the VAT on those sales.
Transactions covered by the new changes
- distance sales of goods within the EU carried out by suppliers or deemed suppliers
- domestic sales of goods by deemed suppliers
- distance sales of goods imported from third territories, or third countries carried out by suppliers and deemed suppliers, except for goods subject to excise duties
- selling or supplying goods from Northern Ireland to non-VAT registered customers in the EU
- making supplies of goods from the EU to non-VAT registered customers in Northern Ireland
- sending low value goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland (including from Great Britain (England, Wales and Scotland))
- non-EU businesses with goods located in Northern Ireland at the point of sale.
It also affects online marketplaces that facilitate the sale of goods:
- located in Northern Ireland (or the EU) by non-EU businesses to non-VAT registered customers in EU and Northern Ireland consumers
- from Great Britain to consumers in Northern Ireland and the EU.
Two new IT systems will be introduced – one for the collection of VAT on imports of low value consignments and the other for the collection of VAT on intra-EU Business to Consumer (B2C) transactions of goods. Both systems are designed to reduce administrative burdens on business and to facilitate the collection of VAT across the EU. Implementation of the EU’s e-commerce package is in accordance with the UK obligations under the Northern Ireland Protocol.