Navigating the New EU VAT Regulations: What Shippers Need to Know

Introduction

As of July 1, 2021, the European Union (EU) has implemented sweeping changes to its value-added tax (VAT) system across all 27 member nations. These changes are designed to simplify tax compliance and promote online cross-border commerce within the EU. At FreightAmigo, we understand that these new regulations can significantly impact businesses engaged in EU trade. In this article, we'll break down the key changes and explain how our Digital Logistics Platform can help you navigate this new landscape.

The New EU VAT Landscape: Key Changes

The VAT overhaul affects two types of business-to-consumer (B2C) merchants:

• Non-EU merchants exporting to the EU
• EU merchants selling across country borders (distance sellers)

Let's explore the major changes and their implications for each group.

Changes for Non-EU Businesses Importing to the EU

1. New €150 VAT Threshold

One of the most significant changes is the removal of the previous VAT exemption for imported goods valued at €22 or less. Now, all imports are subject to EU VAT tax. Here's what you need to know:

• Sellers must charge VAT at the point of sale for import consignments valued at €150 or less.
• For imports valued over €150, regular duty and tax rates still apply.
• The VAT rate is determined by the buyer's delivery address.

As a shipper, you have two options for handling VAT:

1. Delivery Duty Paid (DDP): Collect VAT at the point of sale. This method ensures faster delivery as import VAT is not paid at customs.
2. Delivery Duty Unpaid (DDU): The customer pays import VAT upon delivery. Couriers may act as the import VAT collector, with the customs broker being reimbursed by the customer upon delivery, plus any additional broker fees.

At FreightAmigo, we understand the importance of transparency in shipping costs. Our Digital Logistics Platform allows you to display accurate duty and tax information for each EU shipment, helping to reduce cart abandonment rates and provide a seamless experience for your customers.

2. Simplified VAT Tax Filing

For goods valued below €150, sellers now have the option to declare VAT using a monthly tax declaration called the Import One-Stop-Shop (IOSS). This simplifies the process for reporting distance selling across EU borders. Key points to remember:

• IOSS is used for imports valued below €150. Higher-value imports are filed normally.
• You need to register for IOSS in a single EU state and file quarterly with that local tax authority.
• All EU imports should include your assigned IOSS identification number to facilitate customs clearance.
• IOSS use is optional. Your courier service or online marketplace may declare VAT for you.
• If you choose not to use IOSS, you'll need to appoint a fiscal representative to file on your behalf.

Changes for Online Sellers Shipping Within the EU

EU-based businesses engaged in cross-border sales within the EU will also see significant changes to VAT rules. These changes affect duty thresholds and tax filing processes.

1. Elimination of Distance Selling Thresholds

Previously, EU merchants would register for VAT in receiving countries after surpassing country-specific sales thresholds. As of July 1, 2021, these thresholds no longer exist. Now:

• Cross-border merchants must charge VAT for all sales, regardless of volume.
• The VAT rate applied must be specific to the receiving country.
• The only exception is for micro-businesses, which still have applicable thresholds.

2. New Micro-Business Thresholds

Micro-businesses, defined as those established in a single EU country with sales less than €10,000 in each of the previous two years, are exempt from the new EU-wide distance selling rules. If you qualify as a micro-business:

• You can continue to charge the VAT rate of your origin country, regardless of the shipment destination.
• You remit VAT payments to your local tax authority instead of those in the receiving country.

3. Streamlined VAT Tax Paperwork

The new regulations introduce a simplified filing process for VAT returns:

• You can now file a single VAT tax return, known as an OSS filing, for multiple EU countries.
• This eliminates the need to register with or file taxes in each individual country you ship to.
• Submit a quarterly VAT return electronically via your home country's OSS portal.
• Retain all VAT records for OSS-eligible sales for 10 years.

Note that OSS filing has two exceptions: your home country and any country where you have a physical location or store goods. In these cases, you'll need to file a local VAT tax return.

How FreightAmigo Can Help You Navigate EU VAT Changes

At FreightAmigo, we're committed to helping our clients adapt to these new regulations seamlessly. Our Digital Logistics Platform offers several features to support your EU shipping needs:

1. Accurate Duty and Tax Display: Our platform allows you to show precise duty and tax information for any order at checkout, ensuring transparency and reducing cart abandonment.
2. DDP Payment Collection: We facilitate the collection of Delivery Duty Paid payments at checkout, streamlining the process for you and your customers.
3. DDU Payment Coordination: For Delivery Duty Unpaid shipments, we coordinate payments with couriers, ensuring a smooth process for all parties involved.
4. Comprehensive Shipping Solutions: Our platform offers door-to-door freight quotes for international courier, airfreight, sea freight, rail freight, and trucking solutions, allowing you to compare and book online easily.
5. Real-Time Tracking: Track shipment status anytime, anywhere with our system that connects to more than 1000 reputable airlines and shipping lines.
6. Additional Services: We can help arrange customs clearance, cargo insurance, and trade finance, all in one stop.
7. Document Automation: Our system automates shipment documents, reducing paperwork and potential errors.
8. Expert Support: Our 24/7 logistics expert support ensures you have assistance whenever you need it.

Conclusion

The new EU VAT regulations represent a significant shift in the European eCommerce landscape. While these changes may seem daunting, they also present opportunities for businesses to streamline their operations and expand their reach in the EU market. By leveraging FreightAmigo's Digital Logistics Platform, you can navigate these changes with confidence, ensuring compliance while optimizing your shipping processes.

As the logistics industry continues to evolve, FreightAmigo remains committed to providing cutting-edge solutions that combine artificial intelligence, big data, FreighTech, FinTech, InsurTech, and GreenTech. Our goal is to accelerate logistics, information, and cash flow, ensuring a hassle-free and enjoyable logistics experience for all our clients.

Stay tuned for further updates on EU VAT changes and other important developments in the world of international shipping. With FreightAmigo as your partner, you're well-equipped to thrive in the ever-changing global logistics landscape.