New EU VAT regulations

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New VAT regulations are going to effect next year that could impact the way EU residents order directly from tea vendors in China (and elsewhere) and impact the way those vendors fill those orders. I'm starting this thread as a way of documenting these changes. Please contribute if you find any helpful information!

The official word:

From 1 January 2021 [now postponed to 1 July 2021] the existing VAT exemption for goods up to 22 € will disappear. In order to allow VAT to be levied, all imports into the EU will have to be declared at the border using an electronic customs declaration.

Considering the enormous volume of low-value consignments imported into the EU, neither declarants nor customs IT systems can handle the production and processing of a standard customs declaration per consignment and in any event a standard customs declaration is not necessary in most of the cases because there is no customs liability for goods of a value below 150€.

Therefore, the Commission has amended the UCC Delegated Regulation to provide for a lower, more manageable but still adequate level of data (a “super-reduced data set”) in customs declarations on imports of low-value consignments (those below the threshold for application of customs duties of 150€). This legislation should mitigate, for both customs and traders, the impact of the sharp increase in the number of customs declarations.

Source: https://ec.europa.eu/taxation_customs/n ... gnments_en

[cbrace]

If I understand the following correctly, as of next year Chinese tea vendors (for that matter any seller anywhere in the world) will have to charge VAT to EU customers and transfer the collected tax to the relevant EU member-state tax authorities via an intermediary.

Today, EU and non-EU sellers selling goods online to EU consumers can import the goods into the EU, directly to the consumer, import VAT-free if the consignment of good(s) is valued at €22 or below. This is one of three reforms as part of the July 2021 EU e-commerce VAT package. The other two reforms are:

• Launching the One-Stop-Shop EU VAT return; and
• Making marketplaces deemed supplier VAT.

The low-value consignment VAT exemption, termed the ‘low value consignment stock relief’, was intended to relieve customs from the burden of checking large volumes of packages for small amounts of potential tax revenues. However, it is leaving EU-based sellers at a major price disadvantage since they must charge VAT when the goods were dispatched from within the EU. The exemption has also encouraged large-scale fraud by sellers deliberately under declaring the values of goods to escape the import VAT bill.

Switching import VAT to point-of-sale – Green Channel clearance
The EU has therefore agreed to scrap the import VAT exempt threshold. Instead, it will require EU and non-EU sellers to charge VAT at the point of sale for consignments of €150 or below. This will create a more efficient ‘Green Channel’, with quick and easy customs clearance. Note – the delivery agent may still act as the import VAT collector (see below).

Sellers will charge VAT at the rate of their customer’s EU country of residence at the point-of-sale on the website. Sellers can use the delivery address of the customer to determine the country VAT rate. No VAT is due at the point of import in this case.

IOSS import VAT simplified reporting
To report the VAT charged at the point of sale, a new declaration, ‘Import One-Stop-Shop’ (IOSS), is being introduced. This will report distance selling across EU borders of imported consignments not exceeding €150. Sellers, or deemed supplier marketplaces, will have to register for IOSS in just one EU state. They will be issued a unique IOSS identification number which should be listed on all packages sent to the EU. This will indicate to customs that VAT is being properly declared and help ensure speedy customs clearance.

Like the OSS, IOSS will be a quarterly filing submitted to a tax authority in one nominated EU member state. It will declare import VAT due in all EU countries. The format and due dates will be the same as the VAT OSS. Sellers will have to make a single cash payment of the VAT due to the country where they are IOSS registered.

EU sellers and the IOSS
EU sellers selling goods located outside of the EU to EU customers may also use the IOSS. It will be particularly useful where the seller’s customers are located in other EU states and the seller wants to take care of the import VAT on behalf of their consumer. It also relieves the seller of having to undertake a full VAT registration in each country it is importing into.

What will this mean for a typical non-EU seller?
Non-EU sellers, including from the UK, will have to appoint a VAT Intermediary to act as their agent in a similar way as to a Fiscal Representative. To understand the effects on a typical non-EU seller, let us consider the VAT obligations today and post-2021 reforms for an example non-EU seller, ShanghaiTrade LLC from China.

Today
ShanghaiTrade LLC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or ShanghaiTrade LLC has to pay import VAT at the rate of the country of import. To provide a good seller experience, ShanghaiTrade LLC pays the import VAT on behalf of its customers.

July 2021
ShanghaiTrade LLC will charge VAT at the point-of-sale and declare it in an IOSS return if not exceeding €150. They are then exempted from paying import VAT at customs. ShanghaiTrade LLC may also declare sales to customers around the EU via its OSS return, as discussed in the above section.

For consignments exceeding the €150 IOSS threshold, the import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for ShanghaiTrade LLC if they wish to sell the goods locally or to consumers in the rest of the EU.

IOSS is optional - Postal service or marketplaces may declare the VAT instead
The import OSS is not compulsory for consignments not exceeding €150. Alternatively, the seller may elect to have the import VAT collected from the final customer by the customs declarant. This is generally the postal operator, courier firm or customs agent. They can settle the VAT collected with the tax authorities via a monthly payment.

Source: https://www.avalara.com/vatlive/en/vat- ... turns.html

[wave_code]

Interesting, thanks for sharing this! I'm curious how this will go. In a way it sounds potentially positive to me so far- here its so hit or miss whether you'll get taxed or not depending on what the vendor writes on the package, or maybe just how grumpy someone is feeling on any given morning. I've had rather unpleasant experiences here with the local tax office and German customs seems notoriously obnoxious and difficult for certain vendors to deal with. If any potential VAT is paid upfront it would hopefully expedite things and could mean things arriving a lot faster too since sometimes the slower shipping doesn't even take so long and hold-up actually happens at customs. Also potentially less carelessly ripped open and barely re-sealed packages on delivery.

I'm also curious for cases where you do pay how this will be handled by vendors, like if they will have to adjust pricing or add service charges. I'd rather maybe have to pay more regularly than I would getting the luck of the draw, but also know that everything is paid up. When couriers or the post pre-pay your VAT the services fees they charge for that, as if you even had a choice, are outrageous and its incredibly aggravating to get charge 20-35eur for that "service".

[Maerskian]

Excellent idea, great thread !

Considering what's coming it's time for EU tea-drinkers to start compiling information & resources to have a place where we can all chip in with what we know/find .

Adding some random facts:

- One of the keys for June 2021 will be the so-called "handling fees" ( just an euphemism they use ) for non EU parcels. Apparently Fins already know ( as shared by Kupuntu on Discord's CommuniTEA ) their fixed handling fee will be 2.9€ , although this is just one of the elements of the equation, then there's "their" VAT ( and i say "their" because we live on this abstract creature called "the Union" ) but i think - can't remember - there was a third charge to add to the total amount .

- On Spain this so-called "handling fee" is around 20€ , think Italy & Portugal is somewhere around those lines .

- On Germany your parcels can get stopped at customs, taken to the lab for inspection... with a high chance they'll be deemed "hazardous" ( even if objectively they aren't... from toys, to tea, to ... anything ) , destroyed... and then you'll receive a bill to pay for their brilliant services as it has been reported since a couple years already.

Now, some tea sellers based on eastern asia reported that German customs tend to take chunk of your tea for analysis. Some will be destroyed ( just imagine ordering some fu cha with golden flowers... now effectively banend from entering the EU ) , some will be sent to buyers... with a bill for custom services ... and your puerh cake missing a nice chunk.... glorious!

- Some EU based tea sellers are reporting their tea is being more aggresively inspected since june 2020. Importing teas with chinese orchids ( like some Liu An hei cha ) , golden flowers ( fu cha and some others ) , essential natural oils ( like some taiwanese teas ) , etc... is effectively banned.... already was... only now they are becoming more thorough on their inspections. Apparently there's still some way to slip some fu cha, but it's expected that at some point it'll get really difficult .

- For those that missed the kind of news that get buried on papers: on september 2019 Donald Trump paid 20-30 million dollars to the postal union ( pseudo-global organization ) ; beyond all the purple prose the main intention was to make things more complicated for asian exports and like a charm... starting october 2019 the number of reports on all kind of international forums ( purchases of all kind, electronics, clothing, tea, etc... ) involving EU customers rised as never before. Plenty german users shared tips&tricks to "fake" paypal invoices or edit your web-invoice... and while most of the times worked ... sometimes started to get rejected.

I'm noticing this seems to be a plan implemented on several phases with the first one starting on the last three months of 2019, now it looks like starting june 2020 they just increased the pressure at customs so arguably we're on stage 2 and probably will get worse soon ( january 2021 ? ) until we reach the final stage ( now June 2021 ) .

Unsurprisingly ... don't know what the postal union did with this $US30 million ( or rather... i can let my vivid imagination think about it... but would rather avoid talking about it ) since all postal services within Europe have suffered all kind of cuts and worker's economical conditions are far from improving, i'm assuming we all have read about it since the reality of all postal systems and the dark side have been revealed & shared all over social media, traditional media, etc... on this special year where this service has become more essential than ever .

[cbrace]

I would have hoped "handling fees" would be made redundant if vendors start collecting VAT. Currently here in NL, for example, a parcel valued at less than €22 is processed for free. If the value is above €22, VAT is calculated and paid upfront; the service charge for doing this is €13.

If the local shipping agent no longer has to calculate and cover the VAT payment in advance, one might hope that the service charges would no longer be applied.

[Youzi]

@cbrace

IOSS is optional - Postal service or marketplaces may declare the VAT instead
The import OSS is not compulsory for consignments not exceeding €150. Alternatively, the seller may elect to have the import VAT collected from the final customer by the customs declarant. This is generally the postal operator, courier firm or customs agent. They can settle the VAT collected with the tax authorities via a monthly payment.

Basically this. No Chinese vendor gonna bother with registering finding out the state representative etc.

Basically all packages will be stopped at customs, then you'll have to go though the customs process.

If you use DHL, it'll be fast. If you use post office, they'll take their time.

The prices online will probably like the prices in the US, without tax. And you'll pay it upon entering the country.

[wave_code]

I mean we'll just have to see how it works out, but I highly doubt the point is to start stopping all packages- a big part of the reason I imagine they are doing this is because its already completely overwhelming and financially probably a major loss for the amount of manpower needed to process what they already are. If they increase the amount of packages they are processing by stopping and processing every pair of 2euro garbage headphones that people buy on Wish or whatever the entire mail system will be slogged to the point that incoming mail wouldn't have anywhere to even go probably in a matter of weeks.

I'd imagine rather that on the Chinese end either companies will be established or a govt regulated system for handling these VAT processes will be set up, probably striking a deal with whatever EU country has the easiest paperwork (read: not Germany, probably Netherlands?) for handling payments. I'd imagine there are too many businesses both large and small that rely heavily enough or exclusively on EU focused export to just let them sink.

[Balthazar]

I mean we'll just have to see how it works out, but I highly doubt the point is to start stopping all packages- a big part of the reason I imagine they are doing this is because its already completely overwhelming and financially probably a major loss for the amount of manpower needed to process what they already are.

A similar policy in was enacted in Norway earlier this year, which has basically led to all packages being stopped. All sellers are required to register for a VOEC (VAT On E-Commerce) number in order to charge Norwegian customers VAT and transfer this to the Norwegian authorities. Needless to say, basically no one (save for a few big platforms such as Ebay, Amazon and Aliexpress) has bothered with it. (Also - and as expected - the new policy led to our post system being overwhelmed, and consequently the new policy was put to a halt. I doubt it will be resumed until a post-covid situation.)

If the EU regulation will require a similar registration (I haven't checked), I highly doubt many small vendors will go through the paperwork required (although some medium sized ones might, after all setting this up once for all of the EU members rather than only for a single country with a tiny customer base might make it more palatable).

[aet]

and what will be story with parcels over 150e ?

[wave_code]

Needless to say, basically no one (save for a few big platforms such as Ebay, Amazon and Aliexpress) has bothered with it. (Also - and as expected - the new policy led to our post system being overwhelmed, and consequently the new policy was put to a halt. I doubt it will be resumed until a post-covid situation.)

can't say I'm surprised. the post/tax system was the absolute bane of my existence while I was living in Oslo. For a good stretch of my time there I was dirt poor, but I was doing a lot of work with electronics and needed components/items all the time that were outrageously overpriced from local distributers and was constantly having to find dumb ways to game the system like placing 3 or 4 orders consecutively from the same vendor because it was cheaper to stay under the tax limit and pay the cheap shipping 4 times over than it was to pay the processing fee. My partner would occasionally sneak lab alcohol out to me because I would need it for cleaning things because I couldn't get it at the pharmacy, all that kind of fun stuff. Typically I'd order/buy everything I needed to live (new shoes, booze, so on) back to my family in the US, go home every 6 months with an empty suitcase and haul it all back. My partner would fill her backpack with cheese any time she went somewhere for a conference haha. Oddly enough though I don't think I ever got taxed on any of my tea orders there - tea isn't exempt like books though, right?

[Youzi]

and what will be story with parcels over 150e ?

Same as now. So this whole policy seems completely pointless. because why would individual small vendors go through the trouble to pay EU VAT, for small value, probably also small profit goods.

What I think will happen, is that maybe Aliexpress/Alibaba and these marketplaces will take over this burden, and charge the customers EU VAT, then send it to the proper country, since the money goes through them anyway. But for small Businesses, with individual websites it seems a pointless and time wasting, expensive thing to do for nothing.

Better sell on Ali I guess, and give JM a cut.

[lUKAV28]

I noticed this a few months ago. One of the solutions that was mentioned while I was reading through is that the customs would probably be paid in advance - I know amazon offers sometimes that you can pay fixed amount when ordering abroad - and therefore became a part of the total cost of the purchase. Or shipping might get even pricier because of that? Otherwise I don’t see the point as customs offices will be stacked with small value parcels that will need to go through customs check.

Or vendors will have to start shipping from inside EU.

[aet]

and what will be story with parcels over 150e ?

Same as now.

which is? I'm asking because except parcels below 20e ( or something around this ) I'm not aware of any difference between parcels below 150e and above 150e in matter of customs procedures in EU. I thought that same rules apply .
or am I wrong?

[Youzi]

and what will be story with parcels over 150e ?

Same as now.

which is? I'm asking because except parcels below 20e ( or something around this ) I'm not aware of any difference between parcels below 150e and above 150e in matter of customs procedures in EU. I thought that same rules apply .
or am I wrong?

Under 150 only VAT is charged. Over 150 VAT + Import Duty is charged, and in the case of teapots or any tea ware over 150 the Anti Dumping Duty + VAT will be charged which is around 66% plus or more.

[cbrace]

I found the following post from a Slovakian user in an FB forum dedicated to Yunnan Sourcing. This obviously reflects the current situation, not the forthcoming one (July 2021). Note in particular the invoicing issues:

Package arrived today, yay! Maybe some of you residing in EU will find this useful:

• DHL Kunming to Slovakia (EU) - 3 days
• Slovak customs clearance - 6 days
• Customs tax - 0% on fermented or semifermented tea
• VAT - 20%
• DHL customs clearance flat fee - 24 EUR
• Attached invoice was rejected, I had to send a copy of order and bank transfer statement (I used SEPA to pay)
• Attaching an undervalued invoice might not be a good idea in every case, I was warned by DHL that next time they'll impose an EUR 60 fee for this - supposedly packages under 150 EUR are declared to customs in a different way than above 150 EUR and this mismatch means additional paperwork if the invoice does not match (my order was above 150 but invoice was less)
• Also, I've been advised by DHL to ask our customs for a written binding decision on what constitutes "tea for personal consumption", as they warned me that if I were to order kilograms of tea they might not believe it's for personal use and demand additional paperwork ranging from a business license to sampling and testing by public health authority...so I'm going to do that and post here