Lots of people have been asking us what we know about the tax arrangements for Brexit. Now that the eggs have been unscrambled from the omelette, here is what I think I know*
Items under 22 Euros (intrinsic value)
No import VAT is due on orders < 22 Euros. Note this will all change on 1st July when VAT MOSS comes into being.
- The 22 euros refers to the intrinsic value of the order. This is sale price of orders not including shipping
- If the item is send via a DDU service (e.g. Royal Mail untracked airmail) then no import VAT is due as the customer is the importer of record
- If a company is VAT registered in the country of destination and the seller is the importer of record, then they will need to pay VAT in that country
Items over 22 Euros
Import VAT is due on these items. This can be handled two ways
- DDU (Delivered Duty unpaid). The customer is the importer of record and will be liable for the import VAT (charged on the gross amount including shipping.
- DDP (delivered duty paid). Couriers such as DPD offer a DPD service where they charge the import VAT back to the merchant. The import VAT will be charged on the customs value (shipping + product price).
Couriers offering a DDP service will clear the deliveries into a limited number of countries before sending them to their final destination. DPD for example will clear the deliveries in the Netherlands and charge the import VAT at the Netherlands 21% rate.
This is where it gets complex:
- If you are not registered in either the clearance country or the destination country, you would pay the import VAT at the clearance country rate on the customs value. You cannot claim this back.
- If you registered in clearance and the destination country, you will pay VAT in both and claim back the import VAT in the clearance company
- If you are registered in the destination country and not the clearance country, you will pay VAT in both and not be able to claim it back in the clearance country.
- Amazon stipulates that items must be DDP.
- Sending items DDU where import VAT is payable is a recipe for a) lots of unhappy customers b) lots of undelivered parcels. Not recommended.
In order for items to be send DDP requires a courier which offers this service. Most of the main couriers offer this (DPD, P2P, Asendia) but some don’t (Yodel). The amount they charge for this service vary enormously
- DPD, DHL. About £8.5/package (!!!)
- Asendia, P2P. £0.8/package + 2% of import VAT
When I talked to DPD about this they told me the reason it was so expensive was that they needed to account for the credit risk to paying the import VAT upfront. If this is true then the payment is basically insurance, and £8 insurance/package is pretty blood expensive. I think they either a) want to reduce their volume b) Are taking advantage.
- Customs value. Full value of imported order (Sale price +shipping)
- Intrinsic value. Value of goods in the order only without shipping
- Import VAT. VAT paid on entry into EU on Customs value of goods
- DDP. Delivered Duty Paid. The seller is the importer of record and pay the import VAT
- DDU. Delivered Duty Unpaid. The customer is the importer of record and is charged the import VAT.
*I am not a VAT expert, please seek professional advice