Ecommerce Fulfilment Services

Brexit News: EU Regulations and Trade Updates

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In this blog post

A merchant once shipped a crate of delicate glassware to a quaint boutique in Paris, only to see it held indefinitely at customs. How could this have happened?

The culprit: VAT compliance in a post-Brexit era and botched trade policy negotiations.

Since 1 January 2021, businesses exporting goods to the EU must navigate a labyrinth of VAT regulations or risk their products languishing at the border. Alternatively, you can have a knowledgeable partner to automate processes like EAS.

Understanding VAT Changes

The post-Brexit VAT landscape is a complex web of new regulations that necessitates at least a superficial understanding if you have a capable partner. For exporters, the dismantling of the EU VAT area means adapting to a new regime where goods entering the EU are subject to VAT, and depending on the value, customs duties. It is imperative to understand that thresholds for distance selling no longer apply, and instead, VAT is either managed by the seller or taxes are charged on delivery from the end-customer.

Maintaining a good customer buying experience means either shipping Delivered Duty Paid (DDP) by courier or using the One-Stop Shop (OSS) scheme to simplify the process. These intricate changes require a strategic approach to ensure compliance and uninterrupted commerce.

VAT Rules Post-Brexit

Navigating VAT after Brexit involves understanding new frameworks. Products entering the EU are treated as imports and are subject to VAT and potentially customs duties.

Businesses may utilise the EU’s One-Stop Shop scheme. This streamlines reporting and payment of VAT within the EU, but most importantly, IOSS, for deliveries from outside of the EU, facilitates a better buying experience.

Following Brexit, the new EU Special VAT scheme, implemented in July 2021, abolished the VAT exemption for Low-Value Consignments under €22.

With Brexit concluded, UK exports to the EU are no longer intra-community transactions and customs procedures are re-introduced for cross-border transactions from the United Kingdom. This necessitates awareness of each member state’s VAT rates and regulations or, for savings and less stress, a capable partner. Compliance is key to ensuring seamless international trade.

Impact on UK Exporters

Post-Brexit, UK exporters face a major shift in terms of VAT obligations and customs procedures when selling to EU customers. The removal of previous EU membership privileges necessitates the adaptation of new export strategies to maintain European market presence. The consequences of non-compliance result in terrible buying experience, increased returns, diminishing revenue, additional work and stress and simply costs.

Ensuring VAT compliance in the post-Brexit market goes beyond grasping changes; it involves continuously monitoring each EU country’s shifting tax environments. The rise in administrative tasks pushes UK exporters to seek professional guidance or implement strong systems to handle VAT responsibilities across multiple jurisdictions. While these may add to operational expenses, with the right partner, knowledge and tools, navigating this complexity can lead to a significant competitive edge.

IOSS, VAT and OSS Registrations in the EU

In the intricate tapestry of European Union regulations, correct VAT registrations emerge as a critical juncture for UK businesses selling to EU customers. EU has simplified VAT regulation to benefit cross-border online commerce.

By far the most important being the IOSS, Import-One-Stop-Shop. IOSS simplifies the customs procedure and fiscal compliance, making it the essential tool. Customs process is simplified and centralised clearance is allowed. These lower the shipping costs and time significantly. Fiscal simplification means single VAT filing and payment via IOSS Intermediary for all applicable EU sales.

IOSS has, for the time being, some limitations. On the product type side, excise goods are prohibited from IOSS scheme. There is also a value threshold of 150€ intrinsic value of shipment, meaning value without taxes, shipping or any other fees. It is likely that IOSS will become, in effect, mandatory and applicable for all values with the next round of regulatory changes in EU.

Previous expensive national VAT registration requirement only exists when warehousing goods in that country. The national VAT registration allows for the deduction of VAT on purchases from VATs payable but naturally assumes basic accounting and national filing to be arranged.

Each EU country has slightly different obligations arising from VAT registrations, exaggerated by the fact that the UK Brexit referendum results were what they were. Although some favourable trade deals were accomplished, many countries applied punitive policies. Examples of such are requirements for costly fiscal representatives in some countries.

Country-Specific VAT Requirements

Every EU member state imposes its own VAT rates and registration thresholds. Understanding and adhering to the specific requirements of each country you sell into is non-negotiable, which in reality means get a reliable partner.

Since Brexit has altered the landscape of trade between the UK and EU, now more than ever, sellers must be well-versed in each country’s VAT nuances. Differential rates for various product categories can significantly affect pricing strategies and margins.

A very specific challenge are the varying excise taxed goods in each country, coffee and tea being prime examples. When shipped through one country they are applicable for the simplifications, whereas going through another country customs they are stopped and require full customs procedure with excise taxes and VATs – paid for the second time to the customs.

IOSS vs. DDP

What are the main differences between IOSS and DDP? IOSS is the most cost-effective delivery method to the European Union. It is recommended that IOSS be used whenever possible.

IOSSDDP
Order valueUnder 150€ (excluding taxes and shipping fee)Any Value
Taxes to be paidDestination country VATDestination country VAT
Custom dutiesNo dutiesApplies for over 150€ orders
Handling feesNo handling feesBetween 5€ and 35€ per order
Customs delayNo customs delaysYes
Shipping methodsAny (Postal or Courier)Couriers only
Shipping costLowerHigher
Can VAT be claimed back in case of return?YesUsually not
Geographical coverageAll 27 EU CountriesAlmost Global

Fulfilling EU VAT Obligations

In the post-Brexit trading environment, grasping the subtleties of EU VAT compliance is pivotal for uninterrupted market engagement. Companies selling to the EU must exercise due diligence in accurately calculating and remitting VAT for transactions. Technically the calculations are done differently in each e-commerce platform, recommendation is to find a partner who have in-depth understanding about the applicable platform.

Record-keeping is a non-negotiable. With the IOSS it is even extended to 10 years. Make sure reporting is handled, getting kicked out of the IOSS means you will be required to ship Delivered Duty Paid even the Low Value Consignments which will certainly affect your sales negatively.

Documenting Sales and VAT

Accurate VAT documentation is a critical component of fiscal compliance in the European market landscape. It serves as your ledger, definitively establishing the VAT charged on each transaction.

For each sale, a comprehensive invoice must be generated, delineating the nature of goods or services provided, the applicable VAT rate, and the resulting VAT amount. This documentation serves not only to inform customers but also to substantiate your tax filings. Integration of digital tools streamlines this process, ensuring transparency and accuracy in your financial records. Such precision is imperative to withstand the scrutiny of tax authorities, lowering the risk of compliance breaches.

Due to e-commerce platform complexities and ever evolving nature, it is recommended to find a partner to ensure the platform supports the compliance required by your business model. EAS free configuration service has proven indispensable, most merchants cannot be expected to have such detailed knowledge of the platforms.

Furthermore, the retention of these records must adhere to strict regulatory timelines set forth by individual member states. Different countries may have varying requirements for the period during which VAT documentation should be kept, often ranging from five to ten years. Mastery of these local directives minimises legal exposure and fortifies audit readiness.

Ultimately, your ability to accurately document sales and VAT determines the ease of navigating tax obligations within the EU. Comprehensive records facilitate the reconciliation of transactions and provide a bulwark against discrepancies. As regulations continuously evolve, keeping abreast of changes and implementing robust documentation systems becomes critical, solidifying your standing as a compliant and transparent operator in the European marketplace.

Mitigating VAT Compliance Risks

In the wake of Brexit, ensuring VAT compliance when selling to EU countries has become a complex endeavour, fraught with potential pitfalls. A robust approach involves proactive VAT registration in relevant member states, meticulous record-keeping, and embracing up-to-date knowledge of the shifting regulatory landscape. Adhering to these protocols mitigates the risk of inadvertent non-compliance, which could lead to fines, sanctions, or operational disruptions. In essence, a vigilant stance on VAT matters is an indispensable component of safeguarding your European market presence.

Engaging with VAT Expert EAS

Consulting VAT expert EAS is a step of strategic importance post-Brexit.

  • Understand the complexities of EU VAT obligations and registration processes
  • Gain tailored advice on VAT schemes and compliance solutions
  • Acquire up-to-date guidance on evolving regulations
  • Enlist assistance with VAT reporting and documentation requirements
  • Get insights on cross-border transactions and potential VAT reclaim
  • Most importantly, automate the compliance process

Specialised knowledge is vital, but automation is the building block to business success.

Learn more about IOSS and other EU VAT simplifications at easproject.com

What is Brexit explained simply?

Brexit is the UK’s withdrawal from the EU, impacting trade and business with Europe. New regulations, customs procedures, and tariffs require businesses to adapt. Stay informed to minimise disruptions and serve European customers effectively.

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