Selling to EU consumers has become a whole lot harder with Brexit. From truck drivers having their ham sandwiches confiscated (yes, seriously) to the astonishing new amount of red tape, to extra shipping charges, to delays. The last thing British exporters need are new VAT rules to get their heads round. However Brexit has also triggered VAT changes to how UK businesses trade with EU consumers, and there is another big change coming from 1 July 2021 with the new One Stop Shop (OSS) rules.
Who pays the VAT
If you sell into the EU then from 1 January 2021 you need to decide how to handle the VAT in each country. Putting the OSS rules to one side as they won’t kick in until 1 July 2021, you could either register for VAT in each country where you sell into the EU, or let the customer pay the import VAT. Before Brexit there were Distance Selling thresholds which meant that if your sales in an EU country were below those thresholds then you didn’t need to register for VAT in that country. Those no longer apply for UK businesses. Many small businesses will opt to let the customer pay the import VAT as the administrative headache of multiple VAT registrations doesn’t bear thinking about.
What is the VAT One Stop Shop
From 1 July 2021 the liability for VAT will move to the seller on imports to consumers. It won’t be possible to let the customer pay the import VAT. That means you will no longer have a choice – any non EU business selling to EU consumers will have to register for VAT in each country it sells into.
This change isn’t actually Brexit related – it was going to happen anyway whether or not we left the EU. The Import One Stop Shop or OSS will simplify this multiple VAT registration nightmare by allowing you to register for VAT in one EU member state and collect VAT from ALL your EU sales and report them on one return. This covers sales of goods to EU consumers up to a value of €150 (£135). As the UK is no longer an EU member state that means you’ll have to register in an EU country. Ireland would seem like a good option thanks to the language.
The UK is implementing the equivalent from 1 January 2021 for non-UK sellers selling to UK consumers.
One of the many difficulties with EU VAT is that different countries have different VAT rates. Your website pricing will need to be able to handle the different rates of VAT across the EU. One option would be to geo-lock your website so a French customer can only visit the French website with French prices. Realistically a lot of businesses just have a single location website. An alternative is to have one price of which varying proportions are the VAT collected. You will also have to be able to collect data on the location of each customer and be able to report on that and on the VAT collected for each sale.
What about Online Marketplaces
If you sell via an online marketplace such as eBay or Amazon then you won’t have to have an OSS VAT registration. You could opt to have the marketplace collect the VAT on your behalf and pay it to the different VAT jurisdictions. You can still register for OSS if you prefer, and then provide the marketplace with the details so they don’t automatically add local VAT to your listing prices.
What about VAT MOSS
Businesses that sell digital services in the EU will be very familiar with the One Stop Shop concept. The VAT Mini One Stop Shop or VAT MOSS has been around since 2015. Brexit has caused more problems here as you can no longer be registered for VAT MOSS in the UK. You will instead have to register for the Non-Union VAT MOSS scheme in an EU member state, or register for VAT in every EU country where you supply digital services. Again registering in Ireland is probably a good bet.
Other Brexit VAT issues
If you want to read more about other VAT issues to do with Brexit then have a look at our Brexit archives.