What impact will tax changes in the European e-commerce market have on sales on Amazon?

Changes in the taxation of goods sent to the EU from 1 July 2021
Important changes have taken place in the community market since this date, which have a significant impact on the e-commerce sector. Check what tax rules apply when shipping goods to EU member states by suppliers from third countries and what has changed for sellers storing goods in Europe.

What are the new EU regulations regarding goods tax?
Until 1 July 2021, there was an exemption from VAT on the import of goods valued at no more than 22 euros. This was often exploited to undervalue shipments, resulting in significant losses for the EU treasury. The new regulations changed the rules:

• the VAT exemption has been completely abolished – tax applies regardless of the shipment's value,

• the exemption for low-value imports has been repealed,

• sellers from outside the EU must register each shipment in the electronic system,

• for transactions up to 150 euros, a procedure has been introduced whereby sellers from outside the EU must designate an intermediary to submit monthly VAT returns.

Facilitations for EU sellers – One Stop Shop (OSS)
Companies based in EU member states can benefit from the OSS mechanism, which significantly simplifies VAT settlement. This means that registration in one EU country is sufficient to handle sales to all others. This applies to businesses whose total sales in the EU do not exceed 10,000 euros per year.

In practice, this means that a Polish entrepreneur, having a VAT number and registration in the OSS, can conduct trade across the entire EU market without the need to apply for local tax numbers in 26 other countries.

What effects do the new regulations have?

• Amazon currently has about 6 million sellers, of which 40% are companies from China.

• On amazon.de alone, over 180,000 sellers come from Asia.

• The new regulations force them to pay VAT in Europe, where the sale actually takes place.

• Abolishing the exemption for shipments up to 22 euros increases tax revenues for member states.

What are the advantages of OSS for sellers on Amazon?

• introduces fair competition rules (all sellers must pay VAT),

• eliminates undervaluation of shipments by dishonest companies,

• makes life easier for sellers from the EU (one VAT number instead of many registrations),

• increases the significance of better-quality offerings – customers will pay more attention to parameters than just the price.

In Germany, the number of Chinese companies registered for VAT has increased from 435 to 40,000 in three years (data as of September 2020). This shows the scale of changes enforced by the new regulations.

Sales from outside the EU – new obligations
From July 2021, local customs authorities began tightening controls on shipments from third countries, verifying their actual value. The possibility of circumventing regulations by shipping from European Amazon FBA warehouses by companies from Asia has disappeared – now VAT must also be paid in Europe in such cases.

Every product, regardless of its value, is subject to goods and services tax.

Summary
The new regulations:

• level the playing field,

• increase tax revenues,

• support local sellers from the EU,

• restrict unfair practices of importers from third countries.

If you want to know how to prepare your business for the new sales rules on Amazon, it is worth consulting specialists who will guide you through the formalities.

Happy selling
Go2Market Crew
Amata Borys – Chudek