Alibaba, the company behind AliExpress, the hugely popular Chinese eCommerce platform which sells to customers from the whole world, expects to see a decline in their EU sales in the next months. This would be the result of the newly implemented EU VAT reform, which aims to improve VAT collection and tax compliance, and charge VAT on all goods imported in the European Union.
What has changed for AliExpress with the EU VAT reform?
Prior to July 1, 2021, imported parcels of a value of less than €22 were VAT exempt. This exemption no longer applies, though, and now online platforms need to charge VAT on all sales. This inevitably means that prices are increasing on low-value consignments, and, as a result, customers will most likely buy less from non-EU sellers and marketplaces, according to Alibaba.
Similarly to other marketplaces like Etsy, Amazon, and eBay, AliExpress will collect VAT on:
- Goods imported from outside of the EU, if the order value is under €150
- Goods dispatched from the EU that are sold by non-EU sellers
Customers will simply see the VAT amount at checkout, where they’ll be able to pay the total value of their order (of the goods + VAT). They’ll not need to take any additional steps and should not have any additional import VAT or fees to pay.
In the Netherlands, the Dutch post office, PostNL, adds a fee between €4 to €7 per package, in case VAT is not settled. With the process AliExpress has put in place, however, this should be a rare occurrence. To explain the whole process, AliExpress has created a FAQ page related to the VAT reform in the EU, and what it means for customers.
What has changed for online sellers on AliExpress?
For sellers on AliExpress who import goods into the EU, as well as for their logistics providers, this means that they need to include their IOSS number in the platform to avoid any additional charges.
The platform will calculate the VAT that is due, according to each EU member state’s VAT rules.
For sellers who are based in the EU, the platform will not collect VAT for them, which means they remain responsible for VAT collection and remittance. They can use the OSS (One-Stop-Shop) system to declare VAT on their sales. The VAT rate they need to apply varies; they need to apply:
- The VAT rate of their own country if their annual turnover in the EU is less than €10,000, or
- The VAT rate of the customer’s country, if their annual turnover in the EU exceeds €10,000.
In essence, that’s similar to what sellers on other platforms need to do; for example, Amazon Pan-EU FBA sellers need to comply with similar rules.
Of course, sellers who use online platforms like AliExpress need to factor in the price increase and adapt their pricing policy to stay both competitive and profitable.