In 2021, both the UK and the EU have rolled out important changes to the way VAT on online purchases is handled. These affect eBay sellers who trade with end customers in the EU and UK. Sellers need to understand those changes and adapt to them in order to remain tax compliant, and to correctly assess the impact they’ll have on them.
VAT on imports to the UK
Starting from January 1, 2021, as a result of Brexit, the UK has defined new rules for the VAT taxation of goods imported to the country. The following changes apply:
- For products imported into the UK and of a value of up to £135 (excluding shipping fees and insurance), the online platform, in this case eBay, charges and remits VAT.
- For non-UK sellers whose goods are in the UK at the time of sale, eBay will collect and remit VAT, regardless of the goods’ value.
- Buyers who have a valid UK VAT number will be responsible for accounting for VAT when filing their tax returns at the HMRC.
- Goods of a value of less than £15 will no longer be VAT exempt.
All suppliers selling items on eBay’s UK site have the possibility to define a gross price and the applicable VAT rate, whereas eBay establishes the correct VAT amount and collects it from customers. Prices on eBay.co.uk will include VAT, and VAT will also be displayed separately at checkout, in order to make the purchase process more transparent for buyers.
The current VAT rate in the UK is 20%.
VAT on eCommerce in the EU
Member states have different VAT rates, which can be consulted on the website of the European Commission, or, alternatively, on each government’s site.
On July 1, 2021, the EU is introducing a new VAT package, which will change the rules and regulations of VAT taxation of cross-border trade, for both products in the EU sold by non-EU businesses, or for products imported into the EU from abroad and sold by EU sellers.
Here’s what will change:
- For orders of goods of a value of 150 EUR or less that are imported into the EU, eBay will charge and remit VAT.
- Products of a value of less than 22 EUR will no longer be VAT exempt.
- If the supplier is a non-EU business but the products are located within the EU at the time of purchase, and if the buyer is located in the EU, eBay will be responsible for collecting and declaring VAT.
- Distance selling thresholds for intra-community trade will be abolished.
- EU suppliers who have an annual turnover of 10,000 EUR or more will have to apply the VAT rate of the country of delivery for their EU sales.
Suppliers who have listings on any eBay sites in the EU (f.e. eBay.fr, eBay.es, eBay.de, etc.) will be able to provide a gross price, where eBay will determine the correct VAT rate.
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.