The EU e-commerce package came into effect on 1 July 2021, bringing with it reforms in respect of the movement of goods from Northern Ireland to the EU and imports of low-value goods into the EU or Northern Ireland. It also introduces new rules for supplies made through online marketplaces. These are similar to the existing rules for online marketplaces applying in Great Britain.

The changes will affect you if you:

• sell or supply goods from Northern Ireland to non-VAT registered customers in the EU;
• make supplies of goods from the EU to non-VAT registered customers in Northern Ireland;
• send low value goods to Northern Ireland or the EU from Great Britain or elsewhere outside the EU and Northern Ireland; or
• are a non-EU business with goods located in Northern Ireland at the point of sale.

The reforms also affect you if you operate an online marketplace that facilitates the sale of goods located in Northern Ireland or the EU by non-EU businesses to non-VAT registered customers in the EU or to Northern Ireland consumers, or from Great Britain to consumers in Northern Ireland and the EU.

Impact of the Northern Ireland Protocol  

Under the Northern Ireland Protocol, Northern Ireland is treated as part of the UK for the supply of goods, but as part of the UK in respect of the supply of services. Consequently, the UK’s implementation of the distance selling elements of the EU e-commerce package only applies to supplies of goods in respect of Northern Ireland. As a result, any services that you supply to or from Northern Ireland do not count towards the distance selling threshold.

The imports part of the e-commerce package applies to goods that are imported into Northern Ireland or the EU from outside the EU.

New distance selling threshold

A new pan-European distance selling threshold of €10,000 (£8,818) applies from 1 July 2021. This replaced the previous thresholds of €100,000 and €35,000 set by each EU member state. The new threshold applies to the total cross-border sales by the business across the EU, rather than on a country-by-country basis as was the case before 1 July 2021.        

If you are a business selling goods to consumers (B2C) from Northern Ireland, the new distance selling threshold will apply to you; and you will fall within the scope of the rules if the annual value of your sale of goods across the EU exceeds this level. There is no need to take account of the sale of services as these do not count towards the threshold.

One Stop Shop (OSS)

A new One Stop Shop (OSS) is introduced to prevent businesses falling within the scope of the rules from having to register in each EU member state in which they have customers. If you are a Northern Irish business selling goods in excess of the new €10,000 threshold to EU consumers, you can register for the OSS, rather than registering for VAT in each member state in which you have customers. Registering with the OSS is optional, but it will enable you to declare and pay VAT for EU goods quarterly via one online portal. You can register for the OSS in any member state in which you are registered for VAT. Alternatively, you can register for the UK OSS operated by HMRC when this becomes available. Registrations after 1 July 2021 are effective from the start of the next quarter. To use the UK OSS, you must be registered for VAT in the UK and have an EORI number with an XI indicator. The requirement to be VAT-registered in the UK to use the UK OSS applies even if your turnover is below the current VAT registration threshold of £85,000.

HMRC have stated that they are keen to ensure that VAT will not automatically be due on UK domestic supplies if you register for VAT in the UK in order to use the UK OSS. They are to publish further guidance on this.

Abolition of Low Value Consignment Relief

Low Value Consignment Relief (which provided an exemption from import VAT for consignment of goods valued at less than €22 which were sold online to customers in the EU) was abolished with effect from 1 July 2021. This means that if you sell goods online to EU customers, you will now need to pay import VAT in the country in which the customer is based.

Import One Stop Shop (IOSS)

A new scheme, the Import One Stop Shop (IOSS), was introduced from 1 July 2021. The IOSS, which can only be used for consignments valued at €150 (£135) or less, allows registered businesses to collect the import VAT on B2C orders at the point of sale. If you register for the IOSS, you will then pay the import VAT that you have collected at the point of sale for each EU country each month via the IOSS.

If your business is established outside of the EU, to use the IOSS, you will need to appoint an intermediary to act on your behalf. This will be the case if your business is established in the UK.

If you do not register to use the IOSS, VAT will be collected on importation into the EU, as for high-value consignments.

Remember, if you sell goods through your own website, the rates of VAT that you will need to apply will depend on where in the EU your customers are based. If you sell through a marketplace, such as Amazon, check with your marketplace as to how the changes will affect you.