The EU’s new rules on import tax come into force today and will have precisely no effect on Fighting 15s sending orders to customers there. They affect what happens from the customer’s end, but here in the UK we’ve been living with much the same EU-agreed laws on imports since 1 January 2021 – the UK simply brought them in then because of Brexit, whereas the EU delayed their introduction because of the pandemic.
In short, Fighting 15s continues to deduct VAT from orders to the EU, and this is automatically done in the shop once an EU country is chosen as the delivery destination in the shopping cart. Customers will continue to pay import VAT and a handling fee to the delivery company, usually their country’s mail service. This works better for some countries – Germany, Finland, and Sweden, for example – than for others, such as The Netherlands, Belgium and Denmark, because the handling fee for collecting tax charged by some countries is tiny, whereas The Netherlands’ mail service has the most ludicrously high handling fee of all the EU nations.
The first change on 1 July is the abolition of the 22euro threshold before import VAT is charged. That means no order going to the EU in theory escapes taxation. It is probably no longer worth EU customers placing orders under this threshold because they will get hit with disproportionately high charges on import. If you’re going to order, order big and dilute the effect of the charges. It remains to be seen whether EU mail services will fail to collect VAT on each and every small value item because of the volume of work involved.
The second change is the introduction of the Import One Stop Shop (IOSS), which potentially allows companies outside the EU to collect the VAT at the point of sale, avoiding the unpleasant surprise of a separate charge to the customer. IOSS is currently a complete non-starter for a business such as Fighting 15s because the EU currently requires the appointment of a fiscal representative in the EU to be responsible for the VAT. The cost of doing so ranges from £1,250 to £5,000 a year, with the Royal Mail’s preferred option costing £2,000 a year. Appointing a fiscal representative would require us to add a charge of more than £20 to each and every order from Fighting 15s to the EU. Customers in countries that have a low handling fee are therefore much better off ordering direct and paying import tax and handling fees on import; customers in countries that have a high handling fee aren’t actually much worse off simply paying the import tax and handling fee.
Fighting 15s therefore ruled out IOSS months ago after discovering the costs. If we were still as big as we were as agent for AB and Eureka, two years ago, it would be worth the cost.
It’s not all gloom. Royal Mail has an alternative tax payment route for IOSS via Taxamo which costs only £2 a parcel. However, the only shopping cart for which it is available is Magento (plus an API integration for custom carts), and Fighting 15s uses WooCommerce. If Taxamo rolls out a version for other shopping carts, then we hope in the future to be able to go down the IOSS route for prepayment of import VAT at very little cost to EU customers. It therefore seems better to wait rather than rush into expensive IOSS registration or use other workarounds.