My client supplies digital services to consumers in the EU and runs an e-commerce business selling CDs and MP3 players on their website that are sold in consignments of less than £135/150€.
My client was registered for MOSS in the UK and from the 01 January 2021 they registered in the EU for Non-Union MOSS.
Should my client still charge UK VAT to customers and monitor the distance selling threshold on supplies of CDs and MP3 players?
New EU VAT laws come into effect for e-commerce businesses from the 01 July 2021 that are likely to affect the client.
Up until the 01 July 2021 no Import VAT has to be paid for the supply of goods imported into the EU with a value of up to 22Euros. This rule will be abolished from the 01 July 2021 and all commercial goods imported into the EU from a third country will be subject to VAT irrespective of the value.
The European Commission has created a special scheme called the Import One Stop Shop (IOSS) for distance sales of goods imported from third countries to consumers in the EU.
The IOSS facilitates the collection, declaration and payment of VAT on distance sales of imported goods, allowing suppliers of goods to pay the VAT to the tax authorities via a single registration instead of the buyer paying the VAT on the goods imported or the supplier having to VAT register in several member states.
The VAT payment is applicable to purchases made by a buyer in the EU for goods in consignments not exceeding a total value of £135/150€.
Businesses can register for IOSS from the 01 April 2021 in any EU Member State. Those businesses that are not established in the EU will need to appoint an EU established intermediary to fulfil the VAT obligations for IOSS.
The IOSS Scheme is not mandatory and if the seller does not register for IOSS, then the buyer will be responsible to pay the VAT and any customs clearance fees that are charged by the transporter.
As the client is already registered for Non-Union MOSS, I would suggest they register for IOSS in the same EC Member State. Incidentally, Non-Union MOSS will become Non-Union OSS from 01 July 2021.
The Non-Union OSS has been extended to include B-C supplies of services where the place of supply is the customer’s country, and can be used by all non-established EU businesses supplying services to consumers in the EU. A non-exhaustive list of examples of these services can be found in the second of the links below.
Further information on all the special schemes can be found on the European Commission website.