The new EU One-Stop-Shop rules, which will be introduced on July 1, are designed to stop an estimated designed to stop an estimated €7bn in annual VAT fraud by non-EU ecommerce sellers, mainly located in China, according to Alavera.
However, the EU One-Stop-Shop changes remove remove VAT exemptions for SMEs and shipments not exceeding €22 (£19), which means about 26,000 UK e-commerce sellers will have to register for VAT in an EU member state for the first time.
This will cost a majority of these companies at least €8,000 (£6,900) a year each, or roughly €208m (£180m) annually.
“Now we’re outside of the EU, [the UK has] been lobbed in with VAT-avoiding Chinese traders, and ecommerce companies will pay the price,” Richard Asquith, vice-president global indirect tax at Avalera, told the Financial Times.
UK e-commerce sellers will now have three options when trading into the EU:
- Register for VAT in the country where they sell most of their goods, which the European Commission estimates will cost €8,000
- Subcontract VAT to selling platforms such as Amazon or eBay
- Ask your postal service to handle VAT
Avalera recommends that, with platforms typically charging sellers about 30 per cent of gross prices for their VAT services, companies doing more than 150 transactions a year, which includes most of those doing business in the EU, should register themselves in an EU member state.
What is EU One-Stop-Shop?
From July 1 2021, the EU will create a similar One-Stop-Shop (OSS) for B2C suppliers of all services and goods, which will remove the requirement for a business to have multiple VAT registrations and reporting obligations across the EU.
British sellers (which excludes Northern Ireland) can use the OSS to register as a “non-Union” taxpayer with the tax authority of an EU member states of their choice, except where they already have a fixed address within the EU. The EU estimates this will cost around £6,900 per company each year.
This means that they can file quarterly returns under the OSS and only file a regular domestic VAT return in just one EU member state where they are registered, instead of across multiple states under the current rules.