The European Union removes de minimis exemption from VAT

The European Union removed the de minimis VAT exemption for low-value goods previously set at a value of up to 22 euros (US$ 27).

In general, excise taxes, such as VAT, sales tax, and excise taxes, are often classified as indirect taxes.

This is because they are not imposed directly on intermediaries, but on certain transactions, products or events and are ultimately assumed by the final consumer.

Many countries offer exemptions from paying these taxes.

According to the International Trade Center (ITC), these exemptions allow companies that market low-value export shipments to benefit from the de minimis regime, according to which indirect taxes are not collected.

However, some countries limit the type of tax exemptions available to sellers, mainly micro, small and medium-sized enterprises, of low-value shipments.

As of July 1, 2021, the European Union will eliminate the current VAT de minimis exemption for low-value goods.

De minimis

The value added tax is paid on purchases by final consumers, manufacturers, suppliers or distributors, who can receive a credit for the tax they have paid through their VAT return if the goods are resold.

In the internal market, the EurDe minimisopean Union has a VAT system.

However, although all EU countries follow the same VAT principles, the detailed rules differ from country to country.

When a company is established outside the bloc, import VAT is paid for the release for free circulation of goods imported into the EU from a non-EU country.

Also, according to the ITC, EU VAT registration is only required for sellers outside the block if a warehouse based in the European Union is used or the seller’s income reaches a certain threshold.

Changes

As of July 1, 2021, value added tax registration will be required for all non-EU sellers selling products to European Union consumers, unless another method is used to pay import VAT, for example, through an online marketplace.

VAT registration will only be required in a member state of the European Union.

If sellers use marketplaces (such as Amazon), the marketplace will be responsible for collecting VAT on goods with a value of up to € 150.

E-commerce companies selling via these platforms from outside the EU may not need to register for VAT for lower value products, as the market will be responsible for these obligations.

ITC advises small businesses to study the information provided by their market.