For experts in European law, Council Directive (EU) 2017/2455 details the new European import VAT rules in detail.
For the rest of us, the gist is as follows: previously, the online purchase of a good from a business located outside the European Union was, if worth €22 or less, simply exempted from VAT. The European Commission has decided to abolish this exemption as of 1 July.
In concrete terms, the change will be most noticeable in the e-commerce sector. From now on, a non-EU seller will have to submit a customs declaration for all goods sold and shipped to the EU. Customers will therefore have to be careful and may have to pay VAT to the deliverer, on top of a so-called “delivery processing fee”, which is different from the shipping/delivery fee.
Between 3,000 and 5,000 packages per day for the Post
Consider this example. Martin lives in Luxembourg and buys a phone case for €19.99 (including delivery costs) from an online shop outside the European Union. There are two possibilities.
The online seller might be registered with the European tax authorities and will thus take care of the import VAT, which is then included in the total sale price.
Or the seller won’t take care of it, and Martin will have to pay the import VAT to the delivery worker knocking on his door. If Post Luxembourg delivers the parcel, Martin will also have to pay €3.39 (Luxembourg’s 17% VAT) plus €5 in processing fees charged by the delivery company.
Please note that delivery companies are free to set their own handling fees, which may vary.
In the end, the phone cover Martin bought from a shop outside the EU will cost €28.38 instead of €19.99. That’s €19.99 for the purchase, which included shipping costs; €3.39 in Luxembourg VAT; and €5 in processing fees imposed by Post Luxembourg.
If no one is present when the package arrives, the customer will have to pay the import VAT and the processing fee at the post office counter mentioned on the delivery notice. Note: if the customer hasn’t paid the VAT at the time of purchase, the parcel cannot be delivered to a Post 24/24 PackUp station.
When asked about the impact of this new regulation, Post Luxembourg stressed that it has taken the lead by adapting its sorting centre. “Following this new regulation, Post estimates that between 3,000 and 5,000 items will be cleared per day,” the Post’s communication department explained. “In order to manage this new workload, the entire processing flow, from the sorting centre to the final customer, has been reviewed. Additional human and material resources have been put in place to compensate for the first non-compliant or incomplete customs declarations so that customers receive their parcels as quickly as possible.”
In addition, Post Luxembourg stresses that it has already introduced the possibility of paying the amounts due with Digicash. Customers can also refuse a parcel if they discover that there are additional costs.
Seven billion euros
The European Commission’s decision is motivated by a desire to reduce tax fraud. Several European studies have shown that the exemption is being abused by unscrupulous sellers based in non-EU countries who attach fraudulent labels to shipments of goods (such as smartphones).
“This loophole allows these companies to undercut their European competitors; fraud is estimated to cost EU tax administrations €7 billion a year, creating a heavier tax burden for other taxpayers,” says the European Commission.
This article was originally published in French on Paperjam.lu. It has been translated and edited for Delano.