Updated 2021 EU VAT rules for U.S. or Canadian companies selling goods or services to Europe
If you are a U.S company planning on selling product to customers in Europe this is a 2-3 minute must read! Learn if you should charge taxes and report your sales to the EU. Summarized below are the most important tax rules for ecommerce in 2021.
What is VAT?
Consumption tax added to goods and services in almost all countries. VAT is added to all levels of the production and distribution chain. VAT incurred can often be reclaimed by U.S. and Canadian companies.
EU is a Customs Union:
No minimum threshold - all imports are as of 2021 subject to duty and VAT. One EU border for imported goods and then “free circulation” between EU countries.
July 1, 2021 - EU Ecommerce VAT Reform
Major differences between how North American should operate in these various situations:
1. Is your product/sale worth less or more than €150 EUR ($180 USD)?
2. Would you benefit more from a Special Arrangement?
3. Products sold through marketplaces/electronic interface (Amazon, eBay)?
4. Products shipped to fulfillment warehouses in the EU (Amazon, eBay)?
1. Sales of goods from your website to a private person in the EU
Sale is less than €150 EUR (about $180 USD) in the EU:
U.S. merchant signs up for I-OSS “Import One-Stop-Shop” in one EU country
- Receives unique Import ID number, must be listed on each package shipped to the EU.
- Must appoint a VAT Intermediary to act as agent.
- Imports to any of the EU countries with this procedure.
Example: registered for OSS in the Netherlands can ship directly to France or Germany from the U.S
If your sale is more than €150 EUR (about $180 USD), you have two options:
Private customer pays VAT to customs.
- customer responsible for importing the goods
- your customer pays duty + 15-27% VAT to customs/post office/freight forwarder
or
U.S. company registers for a VAT number in one or several countries in EU
- company pays duty and import VAT to customs
- collect VAT from your customer
- reports VAT quarterly or monthly in the country of registration
2. Special Arrangement (alternative to IOSS)
Shipping companies, postal operators, express couriers and other service providers offer special arrangements for a fee.
- It might be beneficial to make a “special arrangement” with the freight forwarder.
- Under the special arrangement, the U.S. company doesn’t charge VAT at check-out.
- The shipping company will outlay the VAT charge for your shipment when goods are cleared and charge this back to your business or to the customer.
- This way the non-EU merchant can opt to pay the VAT at the point of import (through a custom declaration).
- Billing option such as “free domicile” may be chosen. You need to work out all the details with your freight forwarder. Make sure their Account Executive advises you correctly.
- A fee per shipment would be charged by the carrier.
3. Sale through EU Online Marketplace (Amazon, eBay) ship directly from U.S. to Private Customers
Sale is less than €150 EUR (about $180 USD) in the EU:
Marketplace (Amazon) charges 15-27% EU VAT to private consumers at checkout.
- No duty and VAT due to customs upon import. Use marketplace import id.
- Marketplace acts as importer. U.S. merchant does not need to register for VAT in the EU.
If your sale is more than €150 EUR (about $180 USD) in the EU:
Private customer pays VAT to customs.
- customer responsible for importing the goods
- your customer pays duty + 15-27% VAT to customs/post office/freight forwarder
4. U.S. company stores goods in EU Fulfillment Warehouse (Amazon, eBay)
Marketplaces such as Amazon, eBay are responsible for charging VAT to EU customers on all products shipped from the fulfillment center, regardless of value.
U.S. merchant must:
- Register for VAT in the EU country where fulfillment warehouse is located.
- Pay duty and VAT upon import to the local customs.
- Invoice for the products for 0 value to the platform.
- Declare the imports and sales to the tax authorities, and they will refund the import VAT.
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