Taxes and regulations

New VAT Rules for EU Shippers

Taxes and procedures for EU shipping are changing drastically as of July 1, 2021.

Do you ship to the European Union (EU)? Within the EU? If yes, you’ll want to learn about the sweeping changes to the value-added tax (VAT) system in all 27 EU nations, which goes into effect on July 1, 2021.

The VAT overhaul intends to promote online cross-border commerce and trade within the EU by simplifying tax compliance. The changes impact two types of business to consumer (B2C) merchants:

Non-EU merchants exporting to the EU
EU merchants selling across country borders (distance sellers)

Significant changes come into force in the procedure for levying value added tax in the European Union, applicable to the shipment of goods to EU countries. While this reform is primarily aimed at goods imported in the B2C e-commerce process, while affecting both merchants and online shoppers, it may also affect goods imported in the B2B segment.

Changes for Non-EU Businesses Importing to EU

If you’re exporting to the EU, look for these two changes in the VAT tax law and filings process:

1. New €150 VAT Threshold.

All imports are now subject to EU VAT tax. Previously, imported goods shipped to EU buyers valued at €22 or less were exempt from VAT. The EU has removed this import VAT exempt threshold.

Going forward, all sellers are required to charge VAT at the point of sale for import consignments valued at €150 or less. For imports valued at €150 or more, regular duty and tax rates still apply. The buyer’s delivery address determines the country-specific VAT rate.

Online merchants can collect VAT at the point of sale. This is known as delivery duty paid (DDP). Doing so means you won’t have to pay import VAT at customs and your shipment will reach the customer more quickly.

If you opt for delivery duty unpaid (DDU), import VAT is owed by the customer at delivery. Couriers may still act as the import VAT collector for DDU shipments. In such cases, VAT will be paid by the customs broker, who must be reimbursed by your customer upon delivery, plus any added broker fees.

With Coolorca, you can show accurate duty and tax for each EU shipment. Being transparent about all shipping costs is essential to reducing cart abandonment.

With Coolorca, you can offer the streamlined, surprise-free delivery experience EU buyers expect these days.

2. Simplified VAT tax filing.

When you collect VAT on goods below €150, you now have the option to declare this in a monthly tax declaration known as the Import One-Stop Shop, or IOSS. This form reports any distance selling across EU borders of imports valued below €150. Imports valued at €150 or greater are filed normally.

You’ll need to register for IOSS in a single EU state, and file quarterly with that local tax authority. All EU imports should include your assigned IOSS identification number, which will inform customs authorities that VAT has been declared properly, and accelerate customs clearance.

IOSS use is optional. Your courier service or online marketplace may declare VAT for you instead. Check whether or not your eCommerce platform facilitates these payments.

If you prefer not to file via IOSS, you’ll need to appoint a fiscal representative to file for you.

3. Changes for Online Sellers That Ship Within the EU.

Products sold cross-border in the EU will see three major changes to the VAT tax rules. These changes impact duty thresholds and tax filing processes for EU-based businesses.

No more distance selling thresholds

Historically, EU merchants would register for VAT in receiving countries after surpassing a country-specific sales threshold. For example, €35,000 in France. These selling thresholds disappear on July 1.

Going forward, cross-border merchants must charge VAT for all cross-border sales, not just those past a country-specific threshold. Effectively, this means VAT taxes apply to all cross-border EU sales, and that merchants must charge the VAT rate specific to the receiving country. The only exception is for micro-business thresholds, which still apply.

New micro-business thresholds

A micro-business is established in a single EU country, with sales of less than €10,000 in each of the previous two years. If this sounds like you, you qualify for an exemption to the EU-wide distance selling thresholds.

A micro-businesses may continue to charge the VAT rate of its origin country, regardless of the shipment destination. As before, you remit VAT payments to your local tax authority instead of those in the receiving country.

Less VAT tax paperwork

You can now file a single VAT tax return, known as an OSS filing, for multiple EU countries. In other words, you’re not required to register with or file taxes in each individual country you ship to. You need only submit a quarterly VAT return electronically via your home country’s OSS portal, and retain all VAT records for OSS-eligible sales for 10 years.

An OSS lets you file and pay VAT tax for any EU country, but with two exceptions: your home country, or a country in which you have a physical location or store goods. In a country of exception, you’ll need to file a local VAT tax return.

Shipping Products Internationally

When fulfilling product from a country outside the order origin country (elected country), you are the importer of goods to the elected country and responsible for the payment of all import duties, taxes, and custom fees (collectively “Customs Fees”). If you fulfill product to an address outside your elected country, generally, you are considered the exporter and the buyer is considered the importer. The seller is responsible for export Customs Fees (if any) and the buyer is responsible for any import Customs Fees related to their purchase. Customs Fees paid by any party (if any) are in addition to the sales proceeds collected by Coolorca.

EU Shipping with Coolorca

The new EU VAT regulations will take some getting used to. Specifically, the new duty threshold raises costs for customers and ushers in new filing requirements for merchants.

Additionally, eCommerce platforms in the EU may face additional reporting and VAT collection requirements. We’ll be posting any updates about the EU VAT changes as they’re announced.

Coolorca helps merchants with the new EU duty and tax payments in three major ways, as our platform lets you:

Display accurate duty and tax for any order in checkout
Collect payments for DDP at checkout
Coordinate DDU payments with couriers

Marketplace Tax Collection

A Marketplace Facilitator is defined as a marketplace that contracts with third party sellers to promote their sale of physical property, digital goods, and services through the marketplace. As a result, Coolorca is deemed to be a marketplace facilitator for third-party sales facilitated through Coolorca's global marketplaces.

Marketplace Facilitator legislation is a set of laws that shifts the sales tax collection and remittance obligations from a third party seller to the marketplace facilitator. As the marketplace facilitator, Coolorca will now be responsible to calculate, collect, remit, and refund state sales tax on sales sold by third party sellers for transactions destined to states where Marketplace Facilitator and/or Marketplace collection legislation is enacted. In certain states, local taxes are not included within Marketplace Facilitator Legislation; Coolorca is not responsible for those taxes.

Marketplace Facilitator legislation is currently in effect in the following states:

State	Effective Date	Marketplace Facilitator Legislation
Alabama	1/1/2019	https://revenue.alabama.gov/2018/07/03/ador-announces-sales-and-use-tax-guidance-for-online-sellers/
Alaska	4/1/2020	For a list of jurisdictions/municipalities that have enacted marketplace collection, visit the following link: https://arsstc.org
Arizona	10/1/2019	https://azdor.gov/news-events-notices/news/new-tpt-law-remote-sellers-and-marketplace-facilitators-starting-october-1
Arkansas	7/1/2019	https://www.dfa.arkansas.gov/excise-tax/sales-and-use-tax/arkansas-remote-seller-frequently-asked-questions-faqs
California	10/1/2019	https://www.cdtfa.ca.gov/industry/MPFAct.htm
Colorado	10/1/2019	https://leg.colorado.gov/bills/hb19-1240 Legislation does not include Colorado home rule city sales and use tax on third party sales when the city has not adopted an applicable marketplace facilitator ordinance.
Connecticut	12/1/2018	https://portal.ct.gov/-/media/DRS/Publications/OCG/OCG-8.pdf?la=en
District of Columbia	4/1/2019	https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/page_content/attachments/Wayfair%20Response%20Notice%20%281%202%202019%29_0.pdf
Georgia	4/1/2020	For more information, contact the Georgia Department of Revenue (https://dor.georgia.gov)
Hawaii	1/1/2020	https://tax.hawaii.gov/
Idaho	6/1/2019	https://tax.idaho.gov/n-feed.cfm?idd=4279
Illinois	1/1/2020	For more information, contact the Illinois Department of Revenue Legislation does not include origin sales and use tax on third party sales.
Indiana	7/1/2019	For more information, contact the Indiana Department of Revenue(https://www.in.gov/dor/)
Iowa	1/1/2019	https://tax.iowa.gov/south-dakota-v-wayfair
Kentucky	7/1/2019	https://revenue.ky.gov/Pages/index.aspx
Louisiana	7/1/2020	For more information, contact the Louisiana Department of Revenue (https://revenue.louisiana.gov/).
Maine	10/1/2019	https://legislature.maine.gov/legis/bills/getPDF.asp?paper=HP1064&item=1&snum=129
Maryland	10/1/2019	For more information, contact the Comptroller of Maryland (https://taxes.marylandtaxes.gov/default.shtml)
Massachusetts	10/1/2019	https://www.mass.gov/info-details/remote-seller-and-marketplace-facilitator-faqs
Michigan	1/1/2020	For more information, contact the Michigan Department of Treasury (https://www.michigan.gov/treasury/)
Minnesota	10/1/2018	https://www.revenue.state.mn.us/sales-tax-update-marketplace-providers
Mississippi	7/1/2020	For more information, contact the Mississippi Department of Revenue (https://www.dor.ms.gov/Business/Pages/Sales-Use-Tax-landing.aspx)
Nebraska	4/1/2019	For more information, contact the Nebraska Department of Revenue (https://www.revenue.nebraska.gov/index.html)
Nevada	10/1/2019	For more information, contact the Nevada Department of Taxation (https://tax.nv.gov/)
New Jersey	11/1/2018	https://www.state.nj.us/treasury/taxation/index.shtml
New Mexico	7/1/2019	http://www.tax.newmexico.gov/
New York	6/1/2019	For more information, contact the New York Department of Taxation and Finance (https://www.tax.ny.gov/default.htm).
North Carolina	2/1/2020	For more information, contact the North Carolina Department of Revenue (https://www.ncdor.gov/).
North Dakota	10/1/2019	For more information, contact the North Dakota Office of State Tax Commissioner (https://www.nd.gov/tax/)
Ohio	9/1/2019	For more information, contact the Ohio Department of Tax Commission (https://www.tax.ohio.gov/).
Oklahoma	7/1/2018	For more information, contact the Oklahoma Tax Commission (https://www.ok.gov/tax).
Pennsylvania	4/1/2018	https://www.revenue.pa.gov/Pages/default.aspx
Puerto Rico	7/1/2020	For more information, contact the Puerto Rico Department of Treasury (http://www.hacienda.gobierno.pr/).
Rhode Island	7/1/2019	http://www.tax.ri.gov/Advisory/ADV_2019_11.pdf
South Carolina	4/29/2019	For more information, contact the South Carolina Department of Revenue (https://dor.sc.gov/)
South Dakota	3/1/2019	For more information please contact the South Dakota Department of Revenue.
Tennessee	10/1/2020	https://revenue.support.tn.gov/hc/en-us/sections/360009672231-Sales-Tax-Collection-by-Marketplace-Facilitators
Texas	10/1/2019	For more information, contact the Texas Comptroller of Public Accounts (https://comptroller.texas.gov/)
Utah	10/1/2019	For more information, contact the Utah State Tax Commission (https://tax.utah.gov/)
Vermont	6/7/2019	For more information, contact the Vermont Department of Taxes (https://tax.vermont.gov/).
Virginia	7/1/2019	https://www.tax.virginia.gov/remote-sellers-marketplace-facilitators-economic-nexus
Washington	1/1/2018	https://dor.wa.gov/find-taxes-rates/retail-sales-tax/tax-obligation-marketplace-facilitators
West Virginia	7/1/2019	https://public.wvtax.gov/Business/SalesAndUseTax/ECommerce/MarketplaceFacilitators/Pages/MarketplaceFacilitators.aspx
Wisconsin	1/1/2020	For more information, contact the Wisconsin Department of Revenue (https://www.revenue.wi.gov/pages/home.aspx).
Wyoming	7/1/2019	For more information, contact the Wyoming Department of Revenue (https://revenue.wyo.gov/

Selling products in the EU

As a business trading in Europe, you can benefit from the EU Single Market and also from certain trade arrangements with other European countries. This means most goods can move freely within this territory without any extra costs or quantitative restrictions. This is known as free movement of goods. However, certain goods such as excise goods and chemicals are subject to additional rules. You also have different VAT obligations depending on what you sell, to whom and where the goods are transported to.

Customs formalities must be completed when goods are imported or exported between the EU and any non-EU country (including those benefiting from the free movement of goods, in this case: the European Economic Area, Switzerland, Turkey, Andorra and San Marino).

There is no difference between customers anywhere in the EU

While you are free to define your general terms and conditions of sale, including limitations on delivery, all your customers based in the EU must have the same access to goods as your local customers.

If you offer a special price, promotion or sales conditions, these should be accessible to all your customers irrespective of which EU country they are located in, their nationality, place of residence or business location.

The rules apply to online and offline transactions as long as the sales are to the end user (an individual or business that doesn't have the intention to re-sell, transform, process, rent or subcontract their purchases).

list of the maximum potential tax rates around Europe for certain income brackets. It is focused on three types of taxes: corporate, individual, and value added taxes (VAT). It is not intended to represent the true tax burden to either the corporation or the individual in the listed country. Please take a look here.

Brexit UK VAT for EU & US

EU and US ecommerce sellers face hard choices on taxes and customs in 2021, the end of the Brexit transition period. The UK’s HMRC has imposed new ecommerce VAT registration and customs obligations on any non-UK merchant selling goods consignments to UK consumers not exceeding ≤£135 (about €150 or $175). There is no annual selling threshold – you must UK VAT register and report quarterly. Check EU VAT rules for UK ecommerce sellers after Brexit.

Failure to address from 1 January 2021 will mean:

Blocked goods at the border;
Tax penalties;
Upset customers; plus
If you sell via a marketplace, you will likely be blocked without a UK VAT number

What’s changed on UK ecommerce VAT in 2021?

The UK made the following changes to the ecommerce VAT rules from 1 January 2021 after it left the EU VAT regime and Customs Union:

The UK removed the £15 VAT-exemption on small value parcels. All sales to UK consumers are now subject import VAT.
Sales of goods in consignments not exceeding £135 shipped from outside of the UK to a UK consumer should be charged with UK VAT at 20% in the checkout. This is done by the seller. So the UK is moving the import VAT from the border to the point-of-sale.
The seller has to produce a customs invoice, with the UK VAT showing, to clear the goods into the UK. There is also be a requirement for a slimmed-down customs declaration. If you are importing into the UK, you must be a resident business for certain Customs issues, including the declarations. You may require an import customs representative.
The seller must be UK VAT registered to report this each quarter to HMRC, and pay the VAT collected in the checkout
The seller may no longer rely on their freight company to collect the VAT from their customer.
If the goods consignment is above £135, then the old import VAT rules apply. So the seller or the shopper can pay the UK import VAT
NOTE: there are no UK tariffs due on consignments into the UK below £135.

How UK and Isle of Man businesses can claim EU VAT

VAT incurred on or before 31 December 2020

From 1 April 2021 UK businesses will no longer have access to the EU electronic portal. The deadline for claiming VAT incurred on expenses in the EU on or before 31 December 2020 was 31 March 2021.

VAT incurred on or after 1 January 2021

UK and Isle of Man businesses can still claim refunds of VAT from the EU after the end of the transitional period but they will have to use the existing processes for non-EU businesses. This process varies across the EU so you will need to follow the procedure set out by the country from which you’re making the claim. UK businesses may be required to provide a certificate of status in order to get a refund.

VAT incurred on or after 1 January 2021

Get more information about claiming VAT refunds from EU countries on the EU Commission’s website.

Check how to claim VAT refunds in Northern Ireland or the EU, if you’re established in Northern Ireland or in the EU.

Refunds of UK VAT for non-UK businesses or EU VAT for UK businesses (Notice 723A)

Find out how to claim a VAT refund in the UK if you're established outside the UK, or how to claim back EU VAT if you're established in the UK or Isle of Man.

For VAT purposes, the Isle of Man is treated as part of the UK. VAT is chargeable in the Isle of Man under Manx legislation, which is broadly similar to UK legislation. The schemes described in this notice apply equally to refunds of VAT incurred in the Isle of Man. Any references to the UK in this notice are to be taken to include the Isle of Man.

Taxes on Fees and Payments

Any and all fees payable by you pursuant to this Agreement are exclusive of all taxes, and you will pay any taxes that are imposed and payable on such amounts. All payments made by you to Coolorca under this Agreement will be made free and clear of any deduction or withholding (including but not limited to cross-border withholding taxes), as may be required by law. If any such deduction or withholding is required on any payment, you will pay such additional amounts, as are necessary so that the net amount received by Coolorca is equal to the amount then due and payable under this Agreement.

Responsibility for Taxes

You are responsible for identifying your Tax obligations in addition to the calculation, remittance, and reporting of all taxes within your obligation, regardless of your participation in Coolorca’s Tax Calculation Service.

Sometimes, Coolorca may, consistent with the applicable law, calculate, collect, and remit applicable state, national, or local sales and use taxes, goods, and services taxes (GST), or value added taxes (VAT) (collectively “Taxes”) on orders destined to specific locations. Additional information about the different Taxes You can read below.

The buyer pays the Taxes collected by Coolorca on the product sold.

For example,

Australia's Low Value Imports GST

Australia implemented legislation to impose Goods and Services Tax (GST) on imported goods that are classified as taxable for Australian GST purposes and have a customs value of $1,000 Australian Dollars (AUD) or less (Low Value Imported Goods or LVIG). So, Seller is required to calculate, collect and remit 10% GST on LVIG sold by sellers on Coolorca.com and shipped from outside Australia to an Australian address.

Taxable items are goods that are ordinarily subject to GST in Australia. Items classified as GST-free, such as certain health, food, beverages, and medical items, will continue to be non-taxable regardless of customs value.

The item would not be subject to LVIG GST if its customs value is greater than $1,000 AUD. However, GST, customs duty, and other import processing charges may apply. To enable the item to clear customs you will need to contact your carrier or obtain your own tax advice to determine the amounts payable, ensure that you provide the right information, and ensure that you provide sufficient funds to the carrier to cover these amounts. Coolorca will not calculate, collect or remit any GST payable for these items.

New Zealand enacted similar GST legislation on 1 December 2019. You can read more here.

Coolorca does not report or remit Taxes to any government on behalf of any seller. Sellers remain responsible for any ongoing remittance and/or reporting requirements they may have in connection with Marketplace Withheld Tax or Coolorca’s Tax Calculation Service.

You agree that Coolorca is not obligated to determine your tax obligation, whether taxes apply, and Coolorca will not be responsible to calculate, collect, report, or remit any seller obligated taxes arising from any transaction. However, if a taxing authority requires us to pay any of your taxes, you will promptly reimburse us for the amount paid.

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