The dynamic landscape of Value Added Tax (VAT) in relation to distance selling has undergone significant shifts. This article aims to provide a comprehensive breakdown of the changes, focusing on the implications for businesses in Northern Ireland selling goods to consumers in the European Union (EU).
Distance Selling: Goods From NI
VAT Thresholds for Distance Selling
Previously, businesses in Northern Ireland selling goods to consumers in the EU had to adhere to individual country thresholds for distance sales. However, these individual thresholds have been replaced by a new, unified threshold set at €10,000 (approximately £8,818). This means that once a business crosses this combined sales limit across the EU, they become liable to pay VAT in the destination countries.
One Stop Shop (OSS) System
To simplify administrative processes for businesses, an online One Stop Shop (OSS) system has been introduced. Registering for the OSS permits businesses to report and pay their VAT for all EU distance sales in one consolidated location, alleviating the need to register for VAT in each individual EU country. You can register in any EU member state or the UK if the business aligns with the trading conditions of the Northern Ireland Protocol.
UK OSS Requirements
If a business wishes to use the UK’s OSS and their sales exceed the £8,818 threshold, they must register for VAT in the UK, regardless of their total turnover. This applies even if they’re below the UK VAT registration threshold, which stands at £85,000.
Importation of Goods: What’s New?
The exemption for importing goods valued below €22 has been annulled. This implies that all goods imported into the EU will now incur VAT. However, for transactions below €150, businesses can opt for the Import One Stop Shop (IOSS) system. The IOSS simplifies the VAT declaration and payment process, preventing the need to register for VAT in each EU member state.
The Role of Online Marketplaces for Distance Selling
Online Marketplaces (OMPs) play a significant role in the current VAT landscape:
OMPs and Imports
OMPs registered for the IOSS become accountable for supply VAT on imports of low value goods (below €150) into the EU and Northern Ireland. If an OMP doesn’t register with IOSS, the VAT collection process stays the same.
OMPs and Intra-EU Supplies
OMPs will be responsible for VAT on the sale of goods located within the EU or Northern Ireland if sold on behalf of sellers outside these regions. They can utilize the OSS for VAT reporting on such sales.
Transactions Affected by the Changes
The new regulations encompass a range of transactions. These include distance sales within the EU and sales from Northern Ireland to non-VAT registered EU customers. As well as certain sales facilitated by OMPs.
Innovations in Systems
Two new IT systems will be introduced, which you can use:
- For VAT collection on low value imported consignments.
- For VAT collection on intra-EU B2C transactions of goods.
Both systems reduce administrative burdens on businesses and streamline VAT collection across the EU.
With these transformations the VAT landscape has changed. Businesses in Northern Ireland, especially those involved in distance selling to EU consumers, must stay updated and informed. Adherence to the new guidelines is not only essential for compliance but also for ensuring smooth business operations. Adapting to these changes efficiently will be instrumental in maintaining positive relationships with EU consumers and partners.