EU July 2021 Ending €22 import VAT exemption; new IOSS return

8 May 2020 update: the 2021 EU VAT e-commerce package is delayed, including this reform, until 1 July 2021.

From 1 July 2021, EU states will withdraw the low-value consignment stock relief. This provides an import VAT exemption for goods at or below €22 originating from outside the EU being sold to EU consumers. This generally exemption typically applies to online purchases by EU shoppers buying goods from the US, China or elsewhere outside of the EU. The threshold is being withdrawn to provide a level playing field for EU online and traditional retailers who must charge VAT on all their sales to consumers.  It is part of the EU Action Plan for VAT and other reforms.

Creating a ‘green lane’ for goods at or below €150

In the future, instead of VAT on these shipments of goods from outside the EU being collected at the point of import, it will be charged and collected by the seller at the point-of-sale. Typically, online at the checkout process. This will be supported with the launch of a new import VAT declaration scheme for goods at or below €150 (see below). These two measures combined, will mean more efficient and speedy clearance – ‘green lane’ – for low value imported goods through customs. This will help sellers and provide a better experience for EU consumers.

Introducing the Import One-Stop-Shop VAT (IOSS) declaration

For sales at, or below €150, sellers will have to declare the VAT charged on imported packages in a new VAT declaration, the Import One-Stop-Shop (IOSS). Imported goods with a value above this will have to be reported through a regular VAT return if the seller wishes to declare and recover the import VAT which will be collected at customs as is the current process.

All imported sales below €150 across the EU may be declared in the single IOSS. The VAT rate applied for each sales transaction should be based on the country of residence of the end consumer. Sellers will also be able to submit a simplified customs declaration on the shipments.

However, the seller may elect instead to have their postal operator, courier firm or customs agent collect the VAT from the customers and remit the import VAT to customs.

Differences between customs and VAT definitions

There remain issues to be confirmed prior to the introduction of the new IOSS-based regime for imports. In particular, the definition of intrinsic value and consignment. There are presently different meanings between VAT and customs rules which will cause confusion and potential misdeclarations.