Since January 1, 2021, Brexit has redefined the trade relationships between the EU and the UK. This carries important implications for taxation, and especially for VAT. Goods that cross the UK-EU border are now taxed differently since January 1, and different rules apply to sales transactions between consumers and sellers from either side of the border.
The intra-EU free exchange of goods no longer covers the UK. Instead, businesses and consumers now need to consider that any sale between the UK and the EU is, in fact, an import or an export transaction. This means that many businesses need to redefine their taxation, invoicing and import/export processes, take into consideration the new rules that apply, and comply with new regulations. Tax compliance obligations for EU sellers wishing to deliver products to UK customers, and vice versa, now look different. Both individual sellers, large companies, marketplaces, and international shipping providers need to make sure they’re able to adapt to the changes and comply with new rules in time.
Rules For Goods Dispatched In 2020 And Received In 2021
The pandemic has affected the logistics sector and delivery services globally, especially with new restrictions between the EU and the UK. As a result, some products that were sent before the end of 2020 are much slower to reach their end destination. In case they were shipped before January 1, 2021, but delivered after that date, transitional rules apply, and both the EU and the UK consider these sales as intra-community transactions. If, however, the end customer needs to return a product they bought in 2020 but received in 2021, they have to prove that they haven’t modified it.
EU Rules Will Change Again After July 1, 2021 With The New VAT Package
Each EU member state is now adapting to the change and rethinking their goods imports and exports from and to the UK. There’s a harmonization effort across the EU, in order to guarantee a smooth transition that doesn’t put an insurmountable tax compliance burden on businesses on both sides.
Besides that, the EU is introducing a new VAT package after July 1, 2021, that will affect sellers, marketplaces and postal couriers alike, and which aims to simplify tax reporting and compliance, and prevent tax fraud. According to the new rules, businesses will be able to choose to report taxes and remit VAT in a single EU country, via the One-Stop-Shop (OSS) VAT scheme. This also concerns UK businesses selling in the EU, and is an extension of the currently existing Mini-One-Stop-Shop (MOSS) scheme that is much more limited in scope. Goods of a value of less than €22 will no longer be VAT-exempt; instead of that, for imports of less than €150, couriers and sellers will be able to benefit from a single, simplified report scheme for imports, called IOSS, short for Import-One-Stop-Shop. The burden of VAT compliance will fall on the marketplaces that facilitate sales transactions in some instances.
UK businesses have to quickly adapt to all the post-Brexit changes, if they wish to be able to access the EU market.
How Can Fonoa Help You?
We recommend e-commerce businesses to prepare for these new rules timely. For volume businesses, this means ensuring your IT systems and e-commerce software are ready to handle the complexity these new rules bring and provide you (or your tax accountant) with adequate data to file your tax returns.
At Fonoa, we have developed a platform that is ready for the future and automates all aspects of your e-commerce VAT obligations.
A digital one-stop shop for online retailers with standard integrations to the world’s leading marketplaces and e-commerce tools like Shopify, Woocommerce, Magento and Opencart.
What’s more, reach out to us and we can help you handle your tax registrations, tax filings and representation where needed.