Please note that information provided in this article does NOT constitute tax, legal, or other professional advice.
The European Union (EU) has released details of changes to the collection of EU Value-Added Tax (VAT) on goods sold to customers in the EU, effective July 1, 2021. These changes will impact imports into the EU, supplies within the EU by non-EU domiciled merchants, and cross-border supplies by EU domiciled merchants.
The below article outlines the EU VAT changes and a list of actions merchants can take to ensure they are in compliance with these changes.
EU VAT Changes (effective July 1, 2021)
The below list contains a detailed overview of the changes to EU VAT starting July 1, 2021:
1. Updates to existing EU VAT policies:
- VAT exemption for the import of goods into the EU less than or equal to €22 will be abolished. As a result, all goods imported into the EU will be subject to VAT.
- The current distance sales thresholds for intra-EU cross-border supplies will be abolished and replaced by a new EU-wide threshold of €10,000. EU domiciled merchants with annual sales of more than €10,000 will have to remit VAT in the EU country where the goods are being shipped to (destination country).
2. VAT updates for orders shipping to the EU from outside of the EU:
- If an order’s customer-paid price of the corresponding consignment is less than or equal to €150 (excluding all other customer payments such as shipping and taxes), Wish will calculate, collect, and remit VAT to the EU tax authorities. Therefore, please ensure that the product price and shipping price you provide do not already include the VAT amount. This VAT will be declared and paid via Wish’s Import One-Stop Shop (IOSS). Please see here for more information on the IOSS.
- If an order’s customer-paid product price for the corresponding consignment is greater than €150 (excluding all other customer payments such as shipping and taxes), Wish will calculate and collect VAT, and pass the VAT amount to the merchant when the merchant receives payments for this order. Therefore, please ensure that the product price and shipping price you provide do not already include the VAT amount. VAT amount for these orders must be remitted by merchants to the customs. As the shipment should arrive at the customer’s location as Delivered Duty Paid (DDP), please coordinate with the freight forwarder on how import VAT and customs duties will be handled on your behalf.
To help merchants identify this type of orders, they will be flagged as “Pay Customer VAT “PC-VAT” required” in the Merchant Dashboard, and merchants need to utilize specific shipping carriers to fulfill these orders and comply with EU VAT requirements. Before July 1, 2021, Wish will be announcing various logistics requirements for EU-bound orders, including carrier requirements for “Pay Customer VAT “PC-VAT” required” orders and additional order information that merchants need to file with shipping carriers for customs declaration purposes. We will update this section of the Help Center article soon accordingly.
3. VAT updates for orders shipping to the EU from the EU (i.e., orders shipped within the EU):
- If you are shipping orders within the EU, it is important for Wish to know if you are an EU domiciled merchant or non-EU domiciled merchant with an EU establishment in order to determine your VAT obligation. Non-EU domiciled merchants must complete our EU VAT Questionnaire by July 1, 2021, so Wish can determine if they have an EU establishment (see this guide for more information on how to complete this questionnaire). Non-EU domiciled merchants considered to have an EU establishment will have the same EU VAT obligations as EU domiciled merchants.
- EU domiciled merchants and non-EU domiciled merchants with an EU establishment shipping orders within the EU are ultimately responsible for remitting VAT to the EU tax authorities. See below for options to calculate and collect VAT for intra-EU orders:
1). EU domiciled merchants and non-EU domiciled merchants with an EU establishment may set up Tax Settings via Merchant Dashboard (new Tax Settings for the EU will be available to set up starting June 28, 2021). Once Tax Settings for EU destination countries has been set up, reviewed, and verified, Wish will calculate and collect VAT for intra-EU orders based on the country of arrival of the goods (regardless of the EU-wide distance sales threshold of €10,000) and pass the VAT amount to merchants to remit to the tax authorities. If merchants choose to set up Tax Settings, merchants need to ensure that the product price and shipping price provided do not already include the VAT amount.
If an EU domiciled merchant or non-EU domiciled merchant with an EU establishment is shipping orders within the EU, the VAT calculation (as provided by Wish, if Tax Settings has been properly activated) will assume that the distance sales threshold of €10,000 has already been exceeded or has been waived by the merchant through their own tax administration (in this case, a waiver means that VAT at country of origin will not apply even if the mentioned distance sales threshold has not been exceeded).
2). EU domiciled merchants and non-EU domiciled merchants with an EU establishment may choose not to set up Tax Settings via Merchant Dashboard, in which case these merchants will be responsible for calculating and collecting VAT without relying on Wish’s Tax Settings support before remitting VAT to the EU tax authorities.
- For non-EU domiciled merchants without an EU establishment shipping orders within the EU, Wish will calculate, collect, and remit VAT directly to the EU tax authorities via Wish’s One-Stop Shop (OSS), regardless of the consignment value. Please see here for more information on the OSS.
Please note that the EU VAT changes will not apply to the below-listed EU territories:
- Mount Athos
- Canary Islands
- French territories of Guadeloupe
- French Guiana
- Åland Islands
- Campione d'Italia
- Italian waters of Lake Lugano
- Island of Heligoland
- Territory of Büsingen
Please see below for suggested actions merchants should take to prepare for the EU VAT changes before July 1, 2021 12:00AM CEST:
To comply with the EU VAT changes and ensure VAT for EU-bound orders is collected and remitted correctly, non-EU domiciled merchants are encouraged to complete a short questionnaire in the Merchant Dashboard by July 1, 2021. This questionnaire will help Wish determine whether a non-EU domiciled merchant has an EU establishment, and thus, should be treated as an EU domiciled merchant from an EU VAT perspective.
Until this questionnaire is completed with accurate information provided, Wish will assume that a merchant does NOT have an EU establishment, and therefore, collect and remit VAT on orders shipped within the EU to the EU tax authorities by default starting July 1, 2021. This may lead to double remittance of VAT if the merchant has VAT obligation for intra-EU orders (i.e., the merchant indeed has an EU establishment), and Wish will not refund VAT to the merchant. To avoid such risk, we strongly recommend completing the questionnaire prior to July 1, 2021.
Applicable merchants currently with some or all EU countries enabled in Merchant Dashboard Shipping Settings page will be notified by email to complete this questionnaire. Going forward, merchants will not be allowed to enable new EU countries in Shipping Settings until the questionnaire has been completed.
See this guide for a walkthrough of how to access and complete this questionnaire.
2. Complete EU Tax Settings (applicable to EU domiciled merchants and non-EU domiciled merchants with an EU establishment, as determined by the EU VAT Questionnaire):
EU domiciled merchants and non-EU domiciled merchants with an EU establishment (as determined by the EU VAT Questionnaire described in action No.1 above) will be able to set up the upcoming new EU Tax Settings for their EU destination countries starting June 28, 2021 (intra-EU orders only). Merchants may do so via our Tax Settings page in the Merchant Dashboard.
After merchants set up new EU Tax Settings, the setup will be subject to review by Wish for validity before it becomes active. Once reviewed and verified, Wish will calculate and collect VAT for orders shipping from the EU to the EU destination countries that merchants set up in Tax Settings*, and pass the VAT amount to merchants to remit to the tax authorities. If merchants do not set up the new EU Tax Settings for their orders shipped within the EU, Wish will not calculate and collect VAT on their behalf, and merchants are responsible for fulfilling their EU VAT obligations directly.
For EU domiciled merchants and non-EU domiciled merchants with an EU establishment, Tax Settings that are currently set up to have VAT collected for EU countries will remain until new EU Tax Settings have been set up. For non-EU domiciled merchants without an EU establishment (as determined by the EU VAT Questionnaire), any currently set up EU Tax Settings will be deprecated starting July 1, 2021.
See this guide for a walkthrough of how to access and complete EU Tax Settings starting June 28, 2021.
*If you provide a One Stop Shop (OSS) number for one EU country when setting up Tax Settings, Wish will calculate and collect VAT for your EU-bound orders to all EU countries. If you do not have an OSS number, you will need to provide your VAT numbers for all of the EU destination countries you wish to set up Tax Settings for.
3. Update Secondary Warehouse Addresses (applicable to all merchants shipping to the EU from Secondary warehouses; Merchant Dashboard merchants only):
To ensure correct EU VAT collection and remittance, merchants with Secondary warehouse(s) shipping orders to the EU need to provide or edit the warehouse address(es) via Merchant Dashboard. This is especially important in the context of EU VAT if the current warehouse address is missing or inaccurate.
All merchants shipping orders to the EU must keep their warehouse inventory and addresses up to date at all times, so that the VAT collection can be determined for EU-bound orders shipped from each relevant Primary and/or Secondary warehouse. Wish will monitor merchants’ EU-bound orders to minimize discrepancies of originating countries/regions and will take necessary measures if certain fraudulent behavior is detected.
See this guide for a walkthrough of how to provide or edit Secondary warehouse addresses.