Small businesses selling to the EU face additional administrative costs of £ 180 million
Small businesses selling to Europe will incur an additional £ 180m Red Tap cost as they will be covered by the new EU one stop shop VAT rules.
The new EU one-stop-shop rules, which will be rolled out on July 1, are expected to bring an estimated annual VAT fraud of non-EU e-commerce sellers mainly located in China to EUR 7 billion, according to Alavera to stop .
However, the EU one-stop-shop changes will remove VAT exemptions for SMEs and shipments of no more than EUR 22, which means that around 26,000 UK e-commerce sellers will first have to register for VAT in an EU Member State in time.
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This costs the majority of these companies at least 8,000 euros per year or around 208 million euros per year.
“Now we are outside the EU, [the UK has] Richard Asquith, vice president of global indirect taxation at Avalera, told the Financial Times.
UK ecommerce sellers now have three options when trading in the EU:
- Register for VAT in the country where they sell most of their goods. The European Commission estimates that this will cost € 8,000
- Assign VAT to sales platforms such as Amazon or eBay
- Ask your postal service about VAT
Avalera recommends that companies doing more than 150 transactions per year, including most companies doing business in the EU, should register in an EU member state, as platforms typically sell around 30 percent of the gross price for sellers invoice their VAT.
What is EU One-Stop-Shop?
Starting July 1, 2021, the EU will set up a similar one-stop-shop (OSS) for B2C providers of all services and goods, eliminating the need for a company to have multiple VAT registrations and reporting requirements across the EU.
British sellers (with the exception of Northern Ireland) can use the OSS to register as taxpayers outside the Union with the tax authority of an EU member state of their choice, unless they already have a permanent address within the EU. The EU estimates this will cost around £ 6,900 per company each year.
This means that they can file quarterly returns under the OSS and can only file a regular domestic VAT return in only one EU member state in which they are registered, instead of in several countries according to the applicable regulations.
This will avoid paying £ 130,000 VAT registration fees when exporting to the EU