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e-Commerce: New Declarations Requirements for Low-Value Consignments

What are the changes?

With the exponential growth in e-commerce over the last decade, the de minimis exemption of low value consignments (under £15 in the UK and under €22 in the EU) has resulted in a significant loss in revenue for Member States, given non-EU suppliers a competitive advantage, and tempted fraudulent undervaluing that has cost the EU an estimated €5 billion in lost VAT collections.

Upon its exit from the EU on 1 January, the UK already discontinued its de minimis VAT exemption for low value consignments and the EU will follow suit beginning 1 July 2021. This new legislation also requires fully electronic import declarations to be filed for all low-value consignments (with an intrinsic value under £135 in the UK and under €150 in the EU), even if there are no customs duties due.

Ecommerce VAT Calculation

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Who is affected?

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If you are participating in e-commerce, whether as an online marketplace, seller, postal operator, or logistics provider or courier, these changes apply to you.

Under this new legislation, online marketplaces (defined as platforms, portals, or other electronic interfaces that facilitate e-commerce sales) are liable for collecting, reporting, and remitting the VAT due from the customer on consignments less than £135 in the UK and €150 in the EU. When there is no online marketplace involved in the sale, the seller remains liable for collecting VAT and reporting it appropriately.

EU legislation provides for special arrangements for postal operators, couriers, or customs agents to assume the responsibility for VAT collections. 

This means that all of these parties will need to adapt their systems to accommodate a large volume of declarations for low value consignments using a new type of declaration with a reduced data set.

 

How does it work?

Charging VAT

Online marketplaces and sellers may charge VAT for consignments of €150 or less at the customer's point of sale, determined by the delivery address of the e-commerce order—and they should. Presenting the customer with a total cost of ownership, including VAT and customs duties, upon checkout has become an expectation. Calculating this cost upfront—and accurately—is key to a positive customer experience, as “surprise” VAT charges after the sale often result in disgruntled customers and returned merchandise. Calculating and collecting VAT upfront also cuts down on delivery delays for parcels that are stuck in storage awaiting payment.

A further alternative would be for the postal service or courier to collect the import VAT from the customer and pay it to the relevant tax authority on a monthly basis. This scenario, however, risks greater goods refusal and return due to unanticipated charges.

Reporting VAT

The Import One-Stop Shop (IOSS) scheme has been introduced to simplify VAT reporting. It allows sellers to register and report VAT in just one EU State for sales across all Member States. Online marketplaces, sellers, or their intermediaries will need to file a VAT return through IOSS. Companies that are not eligible for IOSS must file a VAT return in each Member State for all consignments.

Submitting simplified dataset customs declarations

In the EU, declarations must be lodged for every consignment imported. In order to manage this enormous increase in volume of customs declarations, a new customs declaration with a so-called super-reduced dataset (BIRDS dataset in the UK and H7 dataset in the EU) has been introduced for release for free circulation of:

  • low value consignments (under £135 in the UK and under €150 in the EU) of duty-free goods
  • private-to-private consignments up to €45  
  • goods that are not subject to prohibitions or restrictions 

Standard declarations may still be used, however the simplified datasets contain about one-third of the data elements of a standard declaration, which will greatly facilitate and accelerate filings, especially when dealing with a high volume of parcels.

How do I prepare?

Due to the sheer volume of declarations, online marketplaces and sellers that exceed the €10,000 maximum in cross-border B2C sales are advised to automate the VAT calculation and declarations process to ensure seamless operations.

eCommerce

 

Automate the entire process with CAS

Specifically designed to facilitate the automatic filing of different declarations procedures in different countries’ customs systems using different datasets, CAS is uniquely qualified to support all e-commerce stakeholders in adapting to these changes.

With CAS, you simply connect your ERP/WMS system using our fast onboarding and integration process and we’ll take it from there.

  1. When your e-commerce customer makes an online purchase,
  2. CAS accurately calculates duty and VAT due based on the classification of your goods and the delivery address, taking into account any preferential rates,
  3. and adds those charges to the total bill of sale presented to the customer on your platform or store before payment.
  4. CAS then automatically generates a simplified declaration populated with the applicable dataset (BIRDS/H7/reduced data set for low value consignments, H1/full data set for standard declarations)
  5. and files it directly with the appropriate customs authorities.
  6. CAS also offers the option to share the data with your systems and third parties, including customs brokers globally who take care of the last-mile filing.

Ecom VAT Calculation Visual_v2

This new legislation stands to present a considerable administrative burden for e-commerce sellers and online marketplaces but with CAS, we do it all for you. Your customers benefit from fully transparent transactions with VAT and duty calculated at checkout, and you can rest assured you are in compliance and your declarations will be properly filed without any action needed on your end.

Get Started!

Get your automated e-Commerce declarations up and running quickly with our fast onboarding process. Using our APIs, you simply execute a one-time CAS implementation and you will be automatically integrated with multiple countries and their customs systems. CAS is a single-platform solution for all your customs management needs with one-and-done integration for multiple declaration types. Contact one of our experts today to help you get started right away. 

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09.04.2021 - On 1 July 2021, the 27 member states of the European Union will introduce sweeping reforms to the VAT obligations for B2C e-commerce sellers and marketplaces. The UK has implemented VAT marketplace liabilities reforms from 1 January 2021.

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