Many businesses operating across Ireland / Northern Ireland are heavily reliant on the generation of sales via e-commerce (both B2B and B2C). This article examines VAT rules for e-commerce businesses.
Introduction:
Under the NI Protocol, Northern Ireland is treated differently from GB in terms of Business to Consumer (B2C) sales to the EU, with NI continuing to follow EU VAT rules on the sale of goods.
EU VAT e-Commerce rules apply to the receipt or importation of goods into the EU and Northern Ireland in consignments not exceeding a value of €150 / £135.
A uniform distant selling threshold of €10,000 will apply to all EU Member States (including NI) from 1 July 2021. When a supplier makes distance sales in excess of €10,000 in total to all EU member states, the supplier must charge and account for VAT in that Member State.
What VAT rules apply to the import of low value goods into the EU and Northern Ireland from outside the EU and Northern Ireland?
EU VAT e-Commerce rules apply to the receipt or importation of goods into the EU and Northern Ireland in consignments not exceeding a value of €150 / £135.
There are a number of potential options to ease the burden on businesses of collecting and paying import VAT on these small consignments:
1. Import One Stop Shop (IOSS)
The IOSS allows suppliers selling goods from a 3rd country (non EU country) to customers in the EU / NI to collect VAT at the point of sale. VAT is paid by the customer as part of the purchase price.
The IOSS can only be used where the goods, excluding goods subject to excise duty, are dispatched by or on behalf of the supplier from outside of the EU at the time they are supplied, and the intrinsic value of the consignment does not exceed €150.
Benefit to the supplier:
The benefit to the supplier of using the IOSS is that VAT is charged at the point of supply and so no further VAT arises when the goods are imported into the EU / NI. The seller is responsible for collecting the import VAT and making the relevant payment along with the filing of a monthly IOSS VAT return. The supplier must:
- Register in one Member State for all supplies within the scope of the IOSS made across the EU.
- Report and remit all import VAT, within the scope of the IOSS, due across the EU in one monthly return.
- Charge VAT at the applicable rate at the point of sale to a consumer, with the result that goods will proceed through customs without the need for VAT to be paid at the point of importation.
Benefit to the customer:
Consumers will pay import VAT due at the point of sale and avoid further tax or customs charges at delivery of the goods.
Note:
Non-EU sellers will be required to use an intermediary if they wish to use the IOSS. This applies to movements of goods from GB to NI. Using the IOSS is not mandatory, and non-EU suppliers can register in individual member states.
Revenue.ie has further information about the IOSS and how to register.
2. Special Arrangements for declaration and payment of import VAT
The Special Arrangements are a simplification measure designed in particular for postal operators, express carriers and other customs agents in the EU who typically declare low value goods for importation.
The Special Arrangements can be used when the IOSS is not used nor the standard VAT collection mechanism on importation.
Under the Special Arrangements the customer pays the VAT to the courier or postal service presenting the goods. VAT is not paid at check-out. Instead, the customer pays the VAT to the courier or postal service presenting the goods.
The postal service or operator, referred to as the declarant, are then responsible for the subsequent payment of VAT to Revenue.
The special arrangements can only apply to the following imports:
- The goods must be in a consignment of an intrinsic value not exceeding €150.
- The goods must not be subject to excise duty.
- The goods must be delivered to a customer in Ireland and the declaration made in Ireland.
- and
- The IOSS must not be used to declare, and pay, the VAT due on import.
What VAT rules apply to Business to Consumer (B2C) distance sale of goods into the EU from Northern Ireland and Ireland?
Previously each individual EU member state had their own "distance sales threshold". These individual thresholds have been abolished. Instead, a common threshold has been created of €10,000 (£8,818) throughout the EU. This threshold relates to the total cross border sales by the business across the EU, and not on a country-by-country basis.
If the distance sales threshold is not exceeded, the B2C cross-border supplies remain subject to the VAT rules of the member state of dispatch (in this case Ireland / Northern Ireland VAT rules).
For example, if an Irish supplier has total cross border distance sales of €6,000 to all of the EU, the Irish supplier will continue to charge Irish VAT on the supplies.
If the distance sales threshold is exceeded traders must account for VAT in the EU member state of their customer. There are two options to do this:
- Register and account for VAT in each individual EU member state to which goods are supplied.
- File an EU-Wide VAT return via the One Stop Shop (OSS). Whilst the appropriate rate of EU VAT still needs to be applied based on the customer’s location, the OSS allows traders to file a quarterly EU-wide return and make a quarterly payment of VAT. This option may be easier than registering in each individual member state.
What VAT rules apply to sales via online marketplaces?
As a result of e-commerce VAT reform, special provisions apply to businesses that facilitate supplies through online electronic interfaces, such as eBay or Amazon. For VAT purposes, the online marketplace is deemed to have received and supplied the goods and is liable to account for VAT on the sales. The rules apply to:
- Goods in small value consignments of €150/ £135 or less, supplied to a customer in the EU / NI and imported into the EU / NI.
- Goods located in the EU / NI and supplied to customers in the EU / NI, irrespective of their value, when the underlying supplier is not established in the EU / NI.
The single supply of goods sold via an electronic interface is ultimately split into 2 supplies:
-
A supply from the underlying supplier to the electronic interface (B2B supply from supplier to E-Commerce provider for example) and
-
A supply from the electronic interface to the customer (deemed B2C supply from E-Commerce provider to customer).
What VAT rules apply to the cross-border supply of services?
There are certain supplies to non-taxable persons (such as private individuals) that are subject to VAT in the place where they are supplied. Examples of services deemed subject to VAT in the place where they are supplied are, for example, admission to events and certain hiring and transport services.
Businesses supplying such services to non-taxable persons can use the One Stop Shop to simplify their compliance obligations.
This means that businesses do not need to register for VAT in each EU member state where the supplies take place. Instead, VAT due on these supplies can be declared and paid in one single member state via the One Stop Shop.
Is the One Stop Shop Mandatory?
The One Stop Shop is not mandatory. If not using the One Stop Shop businesses will need to register for VAT in EU states which they are deemed to provide a service.
Further information
We have comprehensive information about the:
GOV.UK Policy paper: EU VAT e-commerce package
Revenue.ie: Overview of VAT eCommerce rules
Article reviewed: August 2024