Harmonising import VAT refunds on IOSS and Special Arrangements following 2021 EU e-commerce package
Following the introduction of the new import VAT rules in the July 2021 e-commerce VAT package, the EU is looking to harmonise the treatment returned goods. This requirement for this has arisen due to large new volume of imports subject to VAT, and the alternative ways to declare import VAT. In particular, the treatment of the customs declaration – must it be invalidated – needs to be consistent.
Three import VAT declarations options need harmonising
The e-commerce package made all B2C import sales subject to import VAT – previously there had been an exemption threshold of €22. There are now three channels for the import VAT to be declared by sellers or deemed supplier marketplaces:
- the new Import One Stop-Shop VAT return for consignments not exceeding €150. The import VAT is collected in the checkout process. The IOSS return may be used to correct VAT on returned goods in subsequent returns without the need to invalidate the import declaration
- Special Arrangements simplification for postal operators, express carriers and customs agents. The import VAT is collected as an import duty on delivery to the consumer and therefore refund of VAT might only be possible if the import declaration is invalidated
- Traditional VAT registration in each country where the VAT is collected at customs clearance. Most countries now permit import VAT to be deferred in the return. it appears that the import declaration may need to be invalidated in order to process a request for a refund of import VAT. Otherwise, where not required to the invalidated, what proof is required to support this.
The European Commission is now reviewing issues around the invalidation of the customs declarations, including:
- Proof required to make import VAT correct on return goods in the IOSS
- What happens if the seller decides to destroy the goods
- Is it possible to refund import VAT arising in relation to the return of goods (when the IOSS is not used) without invalidating the import declaration,
- Is the reimbursement of VAT possible in situations where the goods remain in the EU and are, therefore, not exported but, instead, are subsequently sold by the supplier in the EU?