On 1 July 2021 the EU VAT e-commerce package comes into force. By mandating the fully digital handling of import
customs & VAT on all transactions, and with import VAT due on every
shipment to the EU, it will impact all B2C e commerce stakeholders, both in Europe
In this, the first in our Ecommerce Big Bang series, we outline the major areas of change impacting all ecommerce stakeholders, in Europe and globally.
All goods and shipments valued at
less than EUR 22 entering the EU were exempt from import VAT. Shipments from
third countries outside the EU up to a value up to 150 EUR were also customs duty free. Paper-based processes were
sufficient for the import customs clearance procedures conducted by postal operators
– and consequently 2/3rds of commercial item shipments to the EU used the
This lack of digitalized processes
meant a lack of transparency. Consequently, the postal channel has been
frequently misused for import VAT evasion, online retail fraud, and a boom in
By digitalizing all import VAT and
customs clearance processes, the EU VAT e-commerce package puts an end to these
practices. It also revolutionizes the ecommerce business model: customs, import
VAT and shipping channels become independent entities – allowing importers to
optimize flexibility and cost by choosing different service providers for each
The EU VAT e-commerce package comes on the heels of the Universal Postal Union’s (UPU) mandatory electronic advanced data (EAD) notification for every individual cross-border commercial mail item destined for delivery within the networks of designated postal operators worldwide. EAD according to UPU's Global Postal Model came into force globally on 1 January 2021.
In short, the new regulations impact everyone involved in
cross-border B2C e commerce, including online sellers and
marketplaces/platforms both inside and outside the EU, postal and express operators, customs authorities, and tax administrations, right through to consumers
As a result of these changes, as of 1 July 2021 sellers located outside the
EU engaged in B2C e-commerce with the EU, as well as those located in the EU and importing into the EU, will be divided into 2 ‘worlds’,
depending upon the value of the commercial item they ship to the EU:
In the European Commission's own words:
As well as creating a level playing field, there are clear financial interests behind the introduction of the EU VAT e-commerce Package.
The existing model not only gave non-EU online sellers a price advantage when selling shipments valued below 22 EUR to EU consumers, this also resulted in lower tax revenues (import VAT) for EU member states, with billions of shipments entering the EU tax free. The new model will add many billions of VAT to tax revenues. As an example, a 2017 European Commission feasibility study calculated that, based on 2015 figures, VAT fraud, avoidance, non-compliance and false registration accounted for an annual revenue loss of up to EUR 190 billion for the EU as a whole.
In addition, as there is no import without data and digital customs clearance, it will be easier in future to prevent fraud and product counterfeiting.
The CLS Commerce Logistics Specialists are actively shaping the new, legal environment for digital commerce at the Universal Postal Union (UPU), as experts on EU Commission Working Groups (DG TAXUD, DG MOVE), and through Ecommerce Europe (the umbrella association of Europe’s national ecommerce associations), and European Standardization (CEN). CLS is supporting and advising a variety of stakeholders in the industry – postal operators, logistics service providers, online shops and marketplaces.
The Commerce Logistics Specialists provide the advice and support you need to succeed in this evolving digital commerce & logistics environment.
Contact us to find out more.