A Guide to the New EU VAT E-Commerce Rules

Last year, the EU (European Union) implemented certain changes to the VAT obligations which impact businesses selling to a B2C audience (business-to-consumer). This is part of the EU’s VAT E-commerce package. What does this specifically mean for your business? Keep reading to find out.

How do the EU VAT E-commerce rules work now?

The new rules are governed by the EU’s aim to:

Cut down the costs associated with cross-border VAT rules compliance
Put EU and non-EU businesses catering to EU customers on a more level playing field
Boost VAT revenues for the respective Member States

Two major reforms were witnessed:

An end to LCVR (low value consignment relief) and the introduction of IOSS (Import One Stop Shop) as well as OSS (One Stop Shop).

While the IOSS applies to businesses in Scotland, England and Wales selling goods or services to EU audiences only, and those selling services from Northern Ireland to the same – the OSS applies to businesses based only in Northern Ireland and selling goods to EU audiences.

What the end of LCVR and introduction of IOSS means

Prior to the introduction of the new rules, EU and non-EU online merchants selling goods valued at under €22 to EU audiences were exempt from import VAT – what we call Low Value Consignment Relief. Under the new rules, all goods are subject to the import VAT percentages of the EU country in question.

In order to facilitate this change, the IOSS comes into play – a means to allow businesses registered with the IOSS to collect import VAT on B2C orders at the point-of-sale. Businesses can now register in any EU Member State. After they are registered, they can report and pay the total VAT for each EU country they sell to per month through the IOSS – which can be used only for consignments valued at or under €150.

If you’re a business established outside the EU and UK, IOSS rules state that an intermediary must be appointed to act on your behalf.

What the launch of OSS means

Along with the introduction of the IOSS, the EU launched an OSS for intra-EU distance sales (goods) and B2C sales (services).

As per the Northern Ireland Protocol, the OSS may also be leveraged by Northern Irish businesses for movement of goods between Northern Ireland and the EU.

Therefore, Northern Irish businesses do not need to register for VAT in every EU Member State individually where their buyers are – and simply register for the OSS as long as their sales of annual goods in the EU are over an EU-wide threshold of €10,000.

In conclusion – what it means for you

You need to decide whether you must register for the IOSS or the OSS, if you’re Northern Ireland-based and selling goods to EU audiences only.
If you’re selling through your own portal or website, variable VAT rates will apply depending on where your audience is located in the EU.
If you’re selling through a marketplace like Etsy or Amazon, you must check with them to understand how the new seller rules impact you.