Policy paper

EU VAT e-commerce package

Updated 20 September 2021

Who is affected

The changes will affect businesses:

• selling or supplying goods from Northern Ireland to non-VAT registered customers in the EU
• making supplies of goods from the EU to non-VAT registered customers in Northern Ireland
• sending low value goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland (including from Great Britain (England, Wales and Scotland))
• non-EU businesses with goods located in Northern Ireland at the point of sale

It also affects online marketplaces that facilitate the sale of goods:

• located in Northern Ireland (or the EU) by non-EU businesses to non-VAT registered customers in EU and Northern Ireland consumers
• from Great Britain to consumers in Northern Ireland and the EU

Overview

The EU’s e-commerce package will introduce changes from 1 July 2021 in respect of the movement of goods from Northern Ireland to the EU and imports of low value goods into the EU or Northern Ireland. The package also introduces new rules for supplies made through online market places, similar to those already applying in Great Britain and partly in Northern Ireland. Find further information about the UK’s existing scheme see Changes to VAT treatment of overseas goods sold to customers from 1 January 2021.

Goods are low value where they are in consignments with an intrinsic value not exceeding £135 (150 euros). Two new IT systems have been introduced – one for the collection of VAT on imports of low value consignments and the other for the collection of VAT on intra-EU Business to Consumer (B2C) transactions of goods. Both systems are designed to reduce administrative burdens on business and to facilitate the collection of VAT across the EU. Implementation of the EU’s e-commerce package is in accordance with the UK obligations under the Northern Ireland Protocol.

Scope

The intra-EU part of the e-commerce package applies to both goods and certain electronically supplied services throughout the B2C EU. However, as the Northern Ireland Protocol only applies to goods, the UK’s implementation of the EU’s e-commerce package will only apply to supplies of goods in respect of Northern Ireland. This means that supplies of services to or from Northern Ireland do not count towards the distance selling threshold.

The imports part of the package applies to goods that are imported into Northern Ireland or the EU from outside the EU.

Outline of the changes

Distance selling

Sales of goods from B2C between Northern Ireland and the EU

The principle of distance selling of B2C goods between EU member states and Northern Ireland remains unchanged. However, the thresholds of either 35,000 euros or 100,000 euros set by each EU member state (the UK used £70,000) have been replaced with a single pan-European threshold of 10,000 euros (£8,818). This threshold will apply to the total cross-border sales by the business across the EU and not, as previously, on a country-by-country basis. This means businesses selling B2C goods from Northern Ireland to the EU and from the EU to Northern Ireland above the distance selling threshold will be affected by the new rules.

To ease the administrative burden of businesses having to register in each EU member state where they have customers, there will be a new opt-in online One Stop Shop (OSS) quarterly VAT reporting and payment system. This means that businesses falling in scope of the new rules will no longer be required to VAT register in each of the EU member states of their customers. A business opting to register for OSS will be able to do so once in any EU member state or in the UK. To register for OSS in the EU a business needs to have a fixed establishment in the relevant member state. A business can register for OSS in the UK provided that it is trading with the EU under the Northern Ireland Protocol.

Once registered for OSS, the business must account for VAT on all its distance sales through that OSS. Businesses exceeding the £8,818 threshold that wish to use the UK’s OSS will be required to register for VAT in the UK if they are not already registered and will require an XI indicator. The requirement to VAT register will apply even if the overall turnover is below the normal UK VAT registration threshold of £85,000. However, businesses with a turnover below the UK VAT registration threshold will not be required to charge UK VAT on supplies made within the UK.

A UK VAT registration is not required if the supplier registers and accounts for the VAT in each EU member state where the goods are dispatched to.

There are no other changes to the rules on distance sales of goods.

OSS registration is available for businesses to register with HMRC, you should check how to report and pay VAT on distance sales of goods from Northern Ireland to the EU.

Imports

The changes apply to (non-excise) goods imported into the EU and Northern Ireland in consignments not exceeding an intrinsic value of £135 (150 euros). The UK implemented most of the requirements relating to imports into Northern Ireland from outside the UK and the EU on 1 January 2021. The further changes are in respect of online marketplaces and the abolition of Low Value Consignment Relief (LVCR). The intrinsic value is the price the goods were sold at, excluding discrete postage and packaging etc. charges.

To ease the burden on businesses, there is a new opt-in online Import One Stop Shop (IOSS) monthly VAT reporting and payment system.

A business not established in the EU or Northern Ireland wishing to register for IOSS will be able to do so in any EU member state or in the UK. UK IOSS registration portal is not currently available. Further guidance will be provided when the system is available. Businesses in Great Britain that make sales of goods in consignments not exceeding £135 to customers in the EU will have the option to register for IOSS in the EU. Find more information and EU guidance.

As the IOSS scheme is an EU system, with use and access governed by EU law, businesses that opt to use IOSS will need to follow EU guidance, which also sets out what this means for Great Britain businesses and the requirement to appoint an EU-established fiscal representative.

The UK are currently in discussion with the EU Commission about the issue of fiscal representatives in relation to the EU IOSS scheme. This is to see whether we can agree that the condition should not apply to the UK under the terms of the ‘Protocol on Administrative Cooperation and Combatting Fraud in the Field of Value Added Tax and on Mutual Assistance for the Recovery of Claims relating to Taxes in Duties’ included within the Trade and Cooperation Agreement.

VAT registered Great Britain businesses also registered for IOSS that make sales of goods in consignments not exceeding £135 to customers in Northern Ireland should pay any VAT due via their IOSS return and must notify HMRC of their IOSS registration number prior to the goods moving to Northern Ireland. Find out how to tell HMRC your IOSS registration number.

Great Britain businesses that are not VAT registered in the UK as they are below the UK VAT registration threshold, but are registered for IOSS will also be able to tell HMRC their IOSS registration number prior to the goods moving to Northern Ireland. However, these businesses will not be required to charge VAT on supplies to customers in Northern Ireland. Great Britain businesses not registered for IOSS should continue to use the existing VAT treatment for supplies of goods to Northern Ireland.

Online marketplaces and imports

Changes also affect online marketplaces (OMP) importing goods into the EU and Northern Ireland. The UK partly implemented this for imports into Northern Ireland from outside the UK and the EU from 1 January 2021.

An OMP that is registered for the IOSS will be liable to account for the supply VAT on imports of low value goods into the EU and Northern Ireland under the schemes rules. For imports into Northern Ireland, where the OMP has not opted to register for IOSS, import VAT will continue to be collected in the same way as it is now.

Businesses that choose not to opt for IOSS will still be able to continue to export goods to the EU, with any import VAT due in the EU continuing to be collected in the same way as it is now.

Online marketplace liability will not apply in relation to Great Britain businesses that make sales of goods to Northern Ireland customers.

Online marketplaces and supplies within the EU

OMPs will be liable to account for the supply VAT on goods located within the EU or Northern Ireland when they sell these goods on behalf of overseas sellers located outside of the EU and Northern Ireland. The online marketplace liability will also apply in relation to Great Britain businesses that make sales of goods located in Northern Ireland at the point of sale for delivery to EU customers, but not customers in Northern Ireland.

The OMP will account for the VAT as though it were a sale by them and where it is a distance sale within the EU the OSS can be used by the OMP to account for the VAT on those sales.

Examples

Distance selling

Business DA sells £3,000 of goods from Northern Ireland to each of France, Italy and Bulgaria. As the combined value (£9,000) exceeds the £8,818 pan-EU threshold, the seller is required to account for VAT in each of these EU member states. The default requirement is to register for VAT in each EU member state. However, the Northern Ireland seller can register for the OSS in the UK and make one declaration for all 3 sales.

Business DB in Northern Ireland with a total turnover of £30,600, wants to register for OSS in the UK. It is thus required to register for VAT in the UK first to obtain an XI indicator. As the turnover of Business DB is below the domestic UK VAT registration threshold of £85,000, the business does not need to account for VAT on these domestic sales. Business DB can, of course, voluntarily VAT register for these sales. Further information on registration in these circumstances will be provided soon.

Business DC, based in Ireland, is registered for OSS because it makes B2C supplies of electronically supplied services to consumers in EU member states. It also makes these supplies to Northern Ireland customers. As services are not within the scope of the Northern Ireland Protocol, these supplies should not count towards the 10,000 euros threshold nor be declared through OSS. Instead, the Irish supplier will be required to register for VAT in the UK and account for VAT through a UK VAT return.

Low value imports

Supplier LA based in the US supplies £120 worth of goods to a customer in Northern Ireland. As the value is below the £135 threshold, the supplier is liable to register for VAT in the UK and account for VAT on the UK VAT return. Supplier LA may opt to register for the IOSS, and they can do this in any EU member state or the UK. Once registered, supplier LA can account for all their sales valued below £135 made to EU and Northern Ireland customers via IOSS.

Supplier LB based in Japan makes occasional low value supplies of goods into a number of EU member states and is unsure of how the IOSS works. They can use an EU or Northern Ireland established intermediary (agent Z) that is registered for IOSS to account for their sales as though they were the supplier. Agent Z may be similarly contracted with many suppliers like LB around the world. Agent Z is treated as the supplier of all these goods so makes a single declaration for all their clients’ sales through the IOSS.

Supplier LC VAT registered in Great Britain ships £50 worth of goods to a Northern Ireland consumer from Great Britain. The supplier in Great Britain can opt to use the IOSS, they can do this in any EU member state or the UK. If they do not use IOSS, then the normal Great Britain to Northern Ireland rules will apply, and the supplier will account for the import VAT on their VAT return.

Online marketplace imports

Suppler MA based in China sells goods located in China to a Northern Ireland consumer through an OMP registered for IOSS. The OMP is deemed to be the supplier to the customer and the example of Supplier LA (in the Low value imports section) will apply.

Online marketplace intra-Northern Ireland

Supplier NA based in China also has goods stored in Northern Ireland which he sells to a customer through an OMP. The OMP is deemed to sell the goods within Northern Ireland and is required to register in the UK and account for the sales VAT. Similarly if the OMP is also the platform that NA sell goods through in several EU member states that are located in those EU member states, then the OMP will be required to account for the VAT on the sales of these goods in each member state.

OMPs can opt to use OSS for goods located in the EU where goods are sold within and shipped between EU member states including to or from Northern Ireland. If the OMP does not opt to use OSS, then they would be required to register and account for VAT in each of the relevant member states.