From July 1, 2021, the European electronic value-added tax regulations will come into effect, and the effective time is subject to the time the seller places the order. For sellers who are engaged in the European market and intend to enter the European market, keeping abreast of the latest rules and regulations and complying with laws and regulations is the most important thing.
- Detailed analysis of EU tax reform
Starting from July 1, 2021, if you are a self-fulfilling (MFN) seller (outside the EU inventory is shipped directly to EU buyers), B2C orders shipped to the EU, goods with a shipment value ≤ €150 will be withheld by Amazon. And such shipments need to provide IOSS-related information to help EU customs determine that such shipments have been withheld by Amazon, and there is no need to collect relevant import value-added tax. This new regulation will affect sellers using Fulfillment by Amazon (FBA) and self-fulfillment (FBM).
In order for the EU Customs to correctly recognize that the package has been withheld for VAT, this IOSS number must be provided in the customs declaration.
The specifics are: 1. Delivery from the EU inventory to individual EU buyers, and your company’s registered address is outside the EU. 2. Direct delivery from EU stocks to individual EU buyers, and the value of the shipment does not exceed €150, these shipments are subject to specific customs declaration and labeling requirements.
Amazon will withhold and pay according to the tax rate of the destination country. For example, for B2C orders shipped from Poland to Germany, VAT will be withheld and paid according to the German tax rate.
- What is IOSS and OSS
The full name of IOSS: The Import One-Stop Shop, which means the import one-stop VAT electronic declaration system. Starting from 2021.07.01, the EU abolished the tax-free quota for imports below 22 euros. E-commerce platforms must collect VAT value-added tax from buyers when goods are sold, and declare VAT value-added tax every month through IOSS. IOSS VAT declaration is only for goods with a value of less than 150 euros. For example, if our Chinese sellers self-deliver to EU buyers, they need to use IOSS to declare.
(The Union One-Stop Shop): It is the EU’s one-stop VAT electronic filing system. OSS VAT is a new tax law system implemented in order to reduce tax fraud in the e-commerce industry in EU countries, simplify the VAT declaration process and protect the fair competition of local companies. The OSS declaration system will be implemented on July 1.
The OSS will apply to the declaration of VAT for the remote sale of products within the EU. When shipping from EU to EU buyers, they have the option of using OSS in any EU country for all 27 EU countries. Companies outside the EU are no longer affected by the remote sales quota and will be subject to VAT calculation based on the tax rate in the receiving country. The declaration of OSS VAT for EU local companies and EU remote sales for 10000 euros (including all 27 EU countries) is a voluntary registration.
- The impact of the new European tax reform
- Europe will abolish the welfare policy of exempting import VAT tax under 22 euros. From July 1, all goods with a value of less than 150 euros must be declared for VAT through IOSS. The seller needs to affix the IOSS number on the self-delivered package.
- E-commerce platforms are regarded as sellers and need to bear tax obligations. Therefore, in order to reduce their own risks, e-commerce platforms start from 2021.07.01: the platform implements a withholding and payment system for selling VAT. According to the regulations, the seller is still the owner of the goods. Although he does not need to pay taxes himself, he still needs to make a normal VAT declaration.
- The VAT declaration process is simplified, and it is no longer necessary to record the remote sales quota. Chinese sellers only need to register the VAT number of the country where the goods are stored.
In the past, many self-delivery sellers thought that there are remote sales thresholds and tax exemptions. European sites do not require strict VAT tax numbers for self-delivery, and they can sell quietly without a registered tax number. However, the new tax law directly cuts off remote sales. Sales threshold and tax exemption policy, self-delivered goods with a value of less than 150 euros and FBA will all be paid and deducted by the platform by VAT.
Taxation in Europe is becoming more and more unavoidable. This tax reform has completely plugged some small loopholes in tax avoidance by sellers, making the tax compliance of European stations close to perfect. Although the cost of VAT is placed here, the European station still has a large market and high consumption, and there are some tough policies against Amazon, which are all advantages of attracting sellers to enter the European station. As the tax is becoming more and more compliant, the sellers must consider how to solve the tax problem when entering Europe market.