E-commerce - buying and selling of goods and services online - has seen a huge increase in recent years and is only set to continue growing. There are many obvious benefits for consumers, but sometimes consumers can be faced with unpleasant surprises, for example when buying goods from outside the EU and need to pay taxes or charges at importation.
That is why e-commerce rules on how VAT is charged have changed. Find out how your online purchases can help EU businesses everywhere and create public revenue in your home country.
The answer is yes and no:
- ‘YES’, because you are positively affected as an EU citizen. Under the new system, benefits range from less tax fraud, more public revenue being raised as fair taxation becomes the new norm and making trade more competitive. EU environmental and health standards is also safeguarded. So, choose to buy from VAT compliant sellers or marketplaces/platforms, as the VAT you pay will serve to build roads, hospitals, schools and will help the COVID-19 recovery efforts.
However the answer is also ’NO’, because you do not have to do anything directly and you are not obliged to change your shopping habits or where you buy from. But you should be aware the new VAT e-commerce rules are meant to bring transparency, simplify procedures and ensure fair taxation for all providers. That is because previously, non-EU businesses could avoid paying VAT and did not have VAT obligations in the EU - meaning their prices were lower. As a result, EU businesses were disadvantaged.
Due to lack of transparency, you, as the consumer, were sometimes faced with surprise costs or charges to be paid at customs on imported goods. Since 1 July 2021 though, the price you pay can be the final price, with no further calls at importation for VAT or other charges. This is only when you buy goods from a seller or an electronic interface registered in the IOSS.
If they do not register in the IOSS, you will have to pay the VAT and possible other postal/carrier charges when goods are imported.
The VAT and possible other postal/carrier charges will also have to be paid for goods ordered before 1 July but imported/delivered on or after this date. We recommend EU consumers to take this into account when ordering goods from outside the EU and seek more information from the postal operators regarding these additional charges.
These new rules will:
- Ensure that VAT is paid where consumption of goods and services takes place;
- Create a uniform and transparent VAT regime for cross-border supplies of goods and services;
- Re-establish fair competition between European and foreign e-commerce market players, as well as between e-commerce and traditional shops.