Post Brexit VAT rules for eCommerce merchants I Shopify I Herd

From July 1^st 2021 VAT will become simpler for eCommerce B2C businesses that sell goods and services across EU borders (known as distance selling). This change should allow fairer competition for all EU and traders overseas, simplify the process, and reduce the administrative burden for many businesses.

The new One-Stop Shop filing system should put an end to the complicated distance selling thresholds system and multiple VAT registrations required to sell to different EU countries. At present, EU merchants have to register for VAT in EU countries when they reach a country-specific threshold (for Germany this is currently €100,000, but €35,000 for France)

From July 1st there will be no threshold for non-EU sellers such as UK or USA based ecommerce businesses.

We have summarised the latest information from the official bodies to give you our top takeaways for UK based eCommerce businesses:

One-Stop Shop (OSS)

An optional scheme offering an online portal allowing companies to account for VAT in a single interface on a quarterly basis (instead of having to register in each EU Member State where they make B2C supplies)
UK based businesses should register for the Union OSS (One stop shop scheme) in the country where you hold stock. (EU member states register for OSS in their own country)
Note that OSS only accounts for payable VAT, so if you incur VAT in other member states, you may wish to keep your local VAT registrations in order to deduct the VAT incurred on purchases in your VAT return

Mini One-stop shop (MOSS)

An existing scheme which only allows you to account for VAT on supplies of Telecoms, broadcasting and electronic services. The new OSS scheme is an extension of the MOSS to account for other goods and services

New Import One-Stop Shop (IOSS)

Another new portal allowing EU/non-EU business to account for VAT on low value (less than €150) distance sales of imported goods. Traders will charge VAT from EU customers on single orders with a value up to €150
Businesses submit a monthly IOSS return to remit VAT collected from EU consumers. If online sellers or marketplaces do NOT use the IOSS, VAT collection responsibility is still passed to the courier as it was prior to this new legislation
Duty is not payable on goods under the value of €150, only VAT
For orders over €150, normal customs procedures and import tax upon entry to the EU apply
Main advantage of IOSS is that buyers know how much goods cost upon ordering, as they won't incur additional import duties on receipt of their goods, and this process speeds up customs clearance, allowing faster delivery
Note – if you sell to UK customers from UK based stock you still need a local VAT registration to submit returns
UK based businesses must appoint an EU-established intermediary to register with the IOSS, who will be jointly liable for any import VAT owed

What about B2B transactions?

These new rules do NOT apply to B2B transactions - B2B VAT compliance has not changed

How will this be implemented in the Shopify platform?

Shopify will update tax settings from 1^st July automatically to charge the VAT rate of the buyer’s shipping country for sales within the EU
Read the Shopify article on the topic for further clarification and instructions for Shopify merchants

Next steps

Simplyvat.com have put together a useful ebook to help you navigate your way through these changes

Take their short quiz to determine your businesses eligibility for the OSS and IOSS schemes

Further support

Read the full rules on Simply VATs EU VAT Changes Hub

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Post Brexit VAT eCommerce rules - what this means for Shopify merchants