The EU VAT E-Commerce Package

On 1st July, the European Union changed the way in which VAT is reported and paid. The updated schemes are known as the EU VAT E-commerce Package.

If you run a UK small business selling products and services online this could potentially impact you.

Covid-19 caused a big shift in work patterns and as a result a lot of people have started up e-commerce businesses or switched to digital selling. The change to EU VAT reporting is designed to help support these small businesses by removing post-Brexit barriers, simplifying tax reporting, promoting ecommerce and increasing online cross-border transactions.

What will change?

For anyone without a VAT registration, VAT will now be charged based on the country the customer is in, not the country of the seller.

Before 1st July, businesses selling below certain thresholds could charge their home VAT rates which meant they would not need to know lots of different VAT rates.

The EU have now removed distance selling thresholds, meaning that sellers need to know the VAT rates for the country where their customers are located, and apply the correct VAT rate on the invoice.

One Stop Shop

The EU will also be expanding their one stop shop (OSS) simplifications, which allow businesses outside of the EU to report all service sales in a single VAT return.

If you sign up for OSS then that is how you will deal with VAT on all EU sales, regardless of which country consumers that are buying from you are in.

Import One Stop Shop

Non-EU businesses can report the sale of goods with a manifest value at less than €150 via the import one stop shop (IOSS).

It reduces complexity for EU customers by showing the full price of a product, including tax instead of zero-rating products for VAT to be added later.

Speeding up customs requirements could also mean goods arrive faster, giving you another chance to boost customer satisfaction.

Businesses based in the EU still also need to report domestic sales using their normal VAT returns.

The OSS and IOSS systems are both optional, but they will save a lot of paperwork, so they’re worth getting to know. In both cases, sellers sign-up via a website and can report and pay VAT at the same online destination.

If you use any accounting software, this will most likely update automatically with new regulations and VAT options for your invoices.