Selling goods from the UK to EU: What are sellers now expected to do?
The UK has not been part of the EU’s single market for almost a year now, but despite this the additional regulations imposed for shipping goods to and from the EU are still causing some confusion for those involved in selling and fulfilling business to consumer sales between the UK and remaining EU countries.
If you fall into this category; either as an independent multichannel retailer or 3PL fulfilment organisation who supports multiple multichannel B2C retailers; this article will help you in understanding some of the options available, and what they mean to you.
The Tax conundrum: Who pays what now?
When selling to non-UK customer you can’t charge the buyer UK VAT. Therefore for the majority of goods being sold online they should be zero-rated and tax is calculated based on the destination countries VAT rates. Therefore you should declare order values exclusive of UK VAT so the correct Gross Order Value can be calculated against the goods.
Zero-rated goods are still subject to tax, the seller still needs to account for them through VAT accounts and report them on VAT returns. This makes selling into the EU rather complex, as you would need to register, declare and pay VAT in each of the EU countries in which they sell to consumers. That was until the introduction of IOSS…
What does IOSS mean?
The introduction of Import One Stop Shop (IOSS) enabled registration for VAT in a single EU state, therefore filing a single VAT return for all EU transactions up to the value of €150. The idea being it simplifies the process of accounting for VAT as you have a single VAT rate for the EU member state which all EU transactions can be calculated against. You still need to calculate the correct Gross order value to be charged to the customer, but at least it’s only one VAT rate that needs to be considered.
For those that use online marketplaces such as Amazon and eBay it is even simpler, as the online marketplace provider takes on the responsibility of being the supplier and therefore the responsibility of accounting for VAT at the point of sale. Once registered, you receive an IOSS vat number for shipping. So if self-registered, it will be an IOSS number unique to your business. If using a registered online marketplace, they will provide you with their unique IOSS number.
Once you have a valid IOSS number you just need to ensure the order value is less than €150 (excluding UK VAT) and the number is provided to the chosen shipping provider so they can prove to customs that VAT has already been paid. If the order value is over €150, or you don’t have a valid IOSS number to use then the two options commonly used are DDP (Delivered Duty Paid) and DAP/DDU (Delivered at Place).
This is where the seller takes responsibility for all customs tax and duty. In this scenario it is important that Tax and Duty is calculated and added at the point of sale. It can not be charged retrospectively, and so if not calculated correctly the seller can become liable for charges not covered by the sale.
DAP replaced DDU (Delivered Duty Unpaid), but as DDU is still commonly used it’s been included here. Essentially this is where the buyer is responsible for covering all tax and duty custom charges.
Both DDP and IOSS provide the customer with a great experience as they have no hidden fees and what they pay at checkout is all they have to worry about.
In contrast, although DAP removes all responsibility from the seller, de-risking the sale, it can negatively impact the experience the buyer has. This is because they may receive fees they were unaware of, which could impact future sales and customer loyalty.
So, it’s a balance of discovering which is going to be the easiest, lowest risk route for you as a seller vs. the experience offered to your customer when buying goods from you.
By now you can probably see why since Brexit this topic has caused so many issues, not surprising when we consider that 48% of all exports from the UK end up within one of the EU member states.
All that said, with the introduction of IOSS, it should help simplify the process for selling goods to the EU enough for multichannel retailers to continue to expand their international operations further, which can only be a positive thing for all those that are involved in supporting them fulfil their orders. To make things as simple as possible, Mintsoft customers can now input IOSS numbers directly into their dashboard. The IOSS number will then automatically be provided to your courier of choice, so once you’ve inputted the data, your Mintsoft platform will take care of the rest. Mintsoft’s marketplace integrations also make shipping to the EU even easier, by allowing you to manage everything from one centralised location.