VAT on many imported e-commerce items to rise this week


A European e-commerce VAT exemption on items that cost under €22, in place since 2017, ends on 1 July 2021: consumers will have to pay VAT on all goods imported from outside the EU, regardless of value. Photo credit: Claudio Schwarz/Unsplash 

Small goods ordered online and delivered starting on Thursday could be a bit more expensive than consumers in Luxembourg had expected.

Across the EU, an exemption on applying VAT and customs duties on items with a value of €22 or less will end on 1 July.

The changes are part of an effort to boost tax revenue across the bloc by closing loopholes and clamping down on fraud. According to a 2020 European Commission report, EU member states could have collected €140bn more in VAT revenue than they actually did. The figure for Luxembourg was €199m.

Beginning on Thursday, “all online purchases from a third country are subject to a customs declaration, as well as the payment of duties and taxes,” Luxembourg’s Customs and Excise Agency stated on 28 June.

The postal service or delivery company will invoice and collect fees on behalf of delivery customers, the agency explained.

“Some carriers may hold the shipment for payment, others will clear and bill the recipient, along with a disbursement fee for doing so,” Marius Penninks of FedEx wrote for the Bloomberg Law site last week.

VAT rates in the destination country will be applied across the board. The grand duchy has four VAT bands, ranging from 3% to 17%. That means, for example, a Luxembourg resident who placed a €20 order online could have to pay a total of between €20.60 and €23.40, depending on the type of product.

That also means the amount of VAT due could conceivably fall, as many EU countries have higher rates than Luxembourg applies in some categories.