Will Shopify implement the new EU tax regime for UK e-commerce sellers?

[Max1957]

On the 1st July the EU introduces a new tax regime for UK e-commerce distance sellers selling into the EU.  For sales under Euro 150, e-commerce sellers can opt to charge destination country VAT rates to speed up delivery.  For sales above Euro 150, sales will continue to be VAT free with the customer having to pay VAT / charges when the package arrives in the destination country.  Will Shopify be implementing this threshold so that VAT is included/excluded automatically, or will sellers have to process refunds above Euro 150 or use an external app?  Any help on this would be appreciated..

[啵啵]

We fulfillment center packages are able to add this IOSS in the package

[Det742021]

Do you mean Apps like shipping station? Etc?, im sure they do

[AnyDevil]

Thanks very much for this! I removed my direct EU VAT numbers and now Shopify allows me to use its IOSS functionality.  I think that's forcing businesses to break the law if they want to get EU orders, but hey.

Interestingly, I had a chat with the Royal Mail Click and Drop team and they said that, despite Shopify insisting it is not a marketplace or a facilitator, they know that it definitely does have an IOSS number, that we are all supposed to be using.

We will also be using Crossborderit. You mentioned you will be looking at doing your first upload soon - FYI my understanding from them is that with the manual uploads we need to do them daily, it's something to do with the customs clearance.

[Temi18]

Hi @AnyDevil

How long did it take you to sign up with CrossborderIT?

Also, what are your plans for orders over the IOSS threshold?

I plan on using ony royal mail for my delivery orders. Have they said if a IOSS number is compulsory, when shipping with them? 

[AnyDevil]

I think crossborderit took about a week to provide the IOSS number.

Over the threshold is rare for us, it's probably a business order. We will probably pre-pay the VAT using the option provided by DHL, or the Royal Mail option of their DDP service is out and supports that country.

You don't need to provide an IOSS number, Royal Mail won't care, but you'll regret it when the customer has to pay an e.g. 15-30 Euro import fee.

It sounds like Royal Mail's DDP service would be better for you, but Royal Mail hasn't released it yet and all mail is being charged packet rates as large letter isn't supported yet. If you are only just launching I would say it's better to not stress about it and just focus on your domestic market for a few months and let this drama unfold.

[Dbaca]

We offer another service for Duties and Taxes above €150 as well.

[Det742021]

Ok I have to check this out then

[Dbaca]

Crossborderit has a solution above €150 as well. 

[Det742021]

Re Crossfitborder IT,
Since yesterday I had no instructions, and I don’t think they replied to anyone here, and not sure if anything worked..
So I would not be able to upload my file, as had no instructions until lastnight.

[AnyDevil]

I've had no instructions either, I saw them posting here that it's really rather simple. I think we are supposed to figure it out for ourselves by looking at their website. I am figuring it out tonight, looks like a lot of manual CSV work.

[AnyDevil]

I see the Shopify IOSS setup is including the shipping fees in the EU VAT calculation (the higher the shipping fee, the more VAT you pay). Does anyone know if that's correct?

[Det742021]

Yes, shipping is vatable, as you are selling a service.
Post and shipping, parking is vat free in the uk, as soon as you sell these, it is vatable by law, and also vatable in the EU.
Just like before Brexit,

[Dbaca]

One change for IOSS though is that you only need to charge duties on the product. This is a positive change.

[AnyDevil]

Thanks Det742021 (regarding how the shipping amount is VATable). Would appreciate your input on the response I've received from Damon from CrossBorderIT to this post, because they are advising that VAT on shipping is not included in the IOSS submissions and that the likes of Shopify/Amazon are probably not doing it correctly at the moment.  All I care about is that I'm doing this correctly and therefore my customers won't get penalised, but there is no clear consensus on what is correct and what isn't!  To my thinking, if the shipping is indeed VATable for EU sales and it's not being included for IOSS, then the shipping VAT is floating around without a recipient and it's going to make financial accounts incorrect as a result. If it isn't VATable, then great, but it'd be a huge mess-up for the likes of Shopify and Amazon to have got this wrong.

[CelineG]

Regarding VAT on shipping, yes in the UK it is a VATable service. Even prior to Brexit, shipping charges to EU customers were inclusive of VAT. It is also mentioned in the HMRC VAT guidelines. So Shopify and Amazon are correct to apply the VAT to the shipping charges. That's how our pricing is set up in our shop.

So if using IOSS, then shipping to EU customers would have to include VAT.

[Curb_Wear]

VAT is chargeable on shipping to the EU as you mention. Problem is Royal Mail does not populate the shipping cost on Click and Drop, just the product cost. Royal Mail also does not allow you to change price from £ to € for the CN22. It is these two things which will cause a mismatch with the data submitted by Click and Drop and the data sent to Crossborderit.

However, I have 3 shipments leaving for Europe today with IOSS, so will update on here how it goes! 

[rivalhockey]

Our first IOSS experience:

1. Charged the customer VAT at checkout
2. Attached our IOSS number to the order with UPS
3. Failed to upload the order to crossborderit due to their template not being correct & support not answering
4. Customer charged 51 euro fee by UPS as import duty & VAT

Can someone please provide a valid solution to this? One that doesn't create an absolute nightmare experience for the customer or the business.

Thanks

[Det742021]

My understanding that IOSS is just a reporting facility the same we had to do with the EU sales reports online to HMRC.
Just because we can’t upload anything the parcels should still arrive with the incoterms, we sent them with.

We used the IOSS number so far for two weeks and all parcels arrived with no extra cost.
But many people maybe not aware of some fields on the couriers how to fill out the forms, because it can be difficult and
Maybe they don’t it correctly.

You can change the value on the click and drop royal mail, there are 3 tick boxes under each order, and you can over write them and save them if you like.

[AnyDevil]

@Det742021 Damon has recently mentioned that we need to do the IOSS daily because it has something to do with the clearance. That’s all I remember, would appreciate if he could now give a better explanation than I have.

@Dbaca you’ve mentioned to email support with these questions but if you could answer stuff publicly it would really help because it seems multiple people have the same issues / confusion (and there are also many people saying there are support delays). Surely a public reply will massively reduce your workload too.

[London_Loves_Be]

@AnyDevil Totally agree. Our shipments are getting delivered though so IOSS number is working as it should, we haven't uploaded anything yet as we still await answers. We have full records and we are ready to go with the uploads as soon as we get clarification on certain points, same as many others here.

I am still confused by the daily upload thing as VAT returns should only be filed monthly so why daily uploads needed?

[Bibico_Admin]

I would like to know this. We just had a German customer getting charged VAT on recipt of the parcel but itwas booked under IOSS. We have not uploaded the order into the cross border system though.

This is the only one we have had an issue with to date.

[Dbaca]

German post has had some issues. They are sometimes not following the IOSS process. I think it is just new to them so there are some errors. We are communicating with them and I think this will start to become the exception not the rule.

[Dbaca]

Value is not calculated on shipping

Definitions and main customs concepts 1.3.1. Intrinsic value

The new VAT rules for e-commerce have introduced special schemes for the calculation of the import VAT for goods in consignments not exceeding 150€. The applied concept followed the threshold of the customs duty exemption for consignments of negligible value under the Duty Relief Regulation (Regulation (EC) No 1186/2009 – ‘DRR’). Besides, as of July 2021, the Member States will need to integrate a validation mechanism in the declaration processing system (National Import Systems) to check whether the customs declaration for release for free circulation of certain low value consignments (the H7 dataset in UCC-DA Annex B) is legitimately applied. Considering all the above, the customs legislation introduced a legally binding definition for this term that safeguards the harmonised implementation throughout the EU and builds on the approach that has been used for the customs duty exemption threshold. This definition applies for the implementation of the 150€ threshold both for customs and VAT purposes, regardless of the VAT scheme used. Article 1(48) of the UCC-DA provides that “intrinsic value means:

(a) for commercial goods: the price of the goods themselves when sold for export to the customs territory of the Union, excluding transport and insurance costs, unless they are included in the price and not separately indicated on the invoice, and any other taxes and charges as ascertainable by the customs authorities from any relevant document(s);

(b) for goods of a non-commercial nature: the price which would have been paid for the goods themselves if they were sold for export to the customs territory of the Union;

[Dbaca]

Definitions and main customs concepts 1.3.1. Intrinsic value

The new VAT rules for e-commerce have introduced special schemes for the calculation of the import VAT for goods in consignments not exceeding 150€. The applied concept followed the threshold of the customs duty exemption for consignments of negligible value under the Duty Relief Regulation (Regulation (EC) No 1186/2009 – ‘DRR’). Besides, as of July 2021, the Member States will need to integrate a validation mechanism in the declaration processing system (National Import Systems) to check whether the customs declaration for release for free circulation of certain low value consignments (the H7 dataset in UCC-DA Annex B) is legitimately applied. Considering all the above, the customs legislation introduced a legally binding definition for this term that safeguards the harmonised implementation throughout the EU and builds on the approach that has been used for the customs duty exemption threshold. This definition applies for the implementation of the 150€ threshold both for customs and VAT purposes, regardless of the VAT scheme used. Article 1(48) of the UCC-DA provides that “intrinsic value means:

(a) for commercial goods: the price of the goods themselves when sold for export to the customs territory of the Union, excluding transport and insurance costs, unless they are included in the price and not separately indicated on the invoice, and any other taxes and charges as ascertainable by the customs authorities from any relevant document(s);

(b) for goods of a non-commercial nature: the price which would have been paid for the goods themselves if they were sold for export to the customs territory of the Union;

[Christian48]

I've noticed that once the IOSS number went live on Shopify to collect VAT on orders upto €150, VAT has been charged on shipping rates regardless of whether the check box to charge tax on shipping rates is ticked. In fact from what I can see from orders I've had to the EU since I implemented this, Shopify has made the shipping price VAT inclusive and so I'm now not receiving the correct shipping revenue. Instead a portion of it is now VAT and as @Dbaca has clarified, VAT should not be added to shipping costs to the EU. So do I keep the VAT and not declare it anywhere, as Shopify shouldn't have included it in the shipping rate?

[3rdrock]

It seems like Shopify have really dropped the ball on this. Frustrating.

[3rdrock]

we send sub 2kg parcels uk > eu and been told by our broker (aggregator) we cannot specify DDP without an IOSS number for international tracked mail. Whilst this doesn't seem right to me, they insist that's the status.

[3rdrock]

can you tell me which carrier you are using please and what method of shipping? 

[3rdrock]

fair enough indeed 🙂

sent yyou an email to you info address

[Dbaca]

IOSS is not mandatory but there will be clearance fees when there is no IOSS present. DDP works but you need to have a way to pay it. A VAT entity. It sounds like you have an interesting service I am interested on how it works.

[Dbaca]

I posted the legislation about charging the shipping. I will leave it to everyone else to interpret.

[Det742021]

So far Crossborder it upload file for two line is a disaster, what is funny, that I have downloaded their sample file and says the source country GB is invalid, so how come I used the sample file and GB as a source not valid.
I might have to look at others if this is so bad.

[rivalhockey]

Had the exact same problem as above. Sample template doesn't even work and the support team don't reply to any emails. 

Funny how they're so active on this forum, yet don't actually help anyone who signs up...

[Det742021]

Yes maybe I look elsewhere

[Dbaca]

Email me directly and I will make sure that support helps. We are working very hard currently.

[Dbaca]

Contact support@crossborderit.com
Also keep in mind we will have the Shopify app very shortly. This will get rid of manual uploads.

[rivalhockey]

Emailed multiple times over a few weeks. Not a single response.

[Dbaca]

Please look at the date format. This seems to be the biggest problem people are having. it should be the Swedish standard Year, Month, Day..

Please let me know if that clears things up. 

[Dbaca]

Contact me directly damon@crossborderit.com We have been helping hundreds of customers so I am not sure why you would not get a response.

[Det742021]

I emailed today, didn’t get a reply

[Dbaca]

If you emailed me I am working on my mails. I am in California so I wake up and go through the list. If you sent a note to support that is in Sweden so we have some time zone challenges. We have 24//7 customer services but I would like to handle this myself.

[Dbaca]

You can always get me directly at damon@crossborderit.com

[Dbaca]

I am not sure how Shopify is handing this but IOSS demands VAT just on the product.

[Dbaca]

info@crossborderit.com

Your e-mail may be wrong in the system

[Dbaca]

If you are challenged with uploading you can e-mail support@crossborderit.com

[Dbaca]

Uploading will be gone once the APP is in production.

[Dbaca]

You need an intermediary to sign up for IOSS. We have a Shopify app being tested with customers now. But we can handle under €150 and also have a platform for above €150 outside of the IOSS. This wll be in version 3 of our Shopify app. www. crossborderit.com/ioss

[rivalhockey]

@Dbaca Have emailed you guys already but not heard back yet. Can't sign up on your system since it asks for our VAT number. 

We are currently under the VAT threshold in the UK...yet UPS has made IOSS mandatory so we need the number in order to ship to europe. Can you help?

[SSHARP]

Assume this is the same for everyone / the functionality is not working correctly for anyone?

I tried asking Shopify support if was correct and whether it would be updated but they didn't really recognise the issue and said at checkout they would charge VAT based on the order threshold correctly. Would be interested to know if working for anyone as currently in process of registering for IOSS but may have to pause as would be headache to deal with.

[Det742021]

They told me on Friday that it is a bug, quite a big bug I would say!!