VAT reform: import procedure for small consignments under 22 euros

21. Aug 2020 | Cloud, Customs & Foreign Trade, Customs software, Knowledge, Value added tax reform

E-commerce has fundamentally changed retail. New suppliers from third countries are constantly offering their goods in the European Union. So far, these dealers have benefited from exemption limits for small shipments, because special tax exemption limits apply to orders in third countries. In previous practice, import duties were incurred depending on the value of the goods and the type of shipment. Mail order companies from third countries make use of the tax exemption limits, in some cases by deliberately under-invoicing the goods.

The tax authorities lose revenue by under-invoicing such consignments. This is where the VAT reform comes in with the change in the import procedure for small shipments under € 22.

What is the current legal situation for orders from third countries?

Whether import duties from abroad are incurred via the internet depends on the value of the goods and the type of shipment. In previous practice for small consignments from third countries, the following exemption limits apply to consignments of goods:

  • Goods value below 22 euros: There are no import duties. Exceptions are alcoholic products, perfumes and eau de toilette as well as tobacco and tobacco products and products containing coffee.
  • Imports with a value of goods between € 22 and € 150: These are considered duty-free, but import sales tax is charged.
  • From a value of goods of 150 €: The respective customs tariff applies.

What will change as a result of the VAT reform?

Import sales tax for small shipments under 22 euros

The legislature has recognized that retailers consciously indicate their goods with a lower value in order to avoid taxes. This results in a loss of revenue for the tax authorities. He has therefore decided to abolish this regulation.

The exemption limit for the import of shipments from non-EU countries with a goods value of up to € 22 does not apply from July 1st, 2021. Originally the date was January 1st, 2021, but the Council for Economic and Financial Affairs of the European Union (ECOFIN) decided on July 22nd, 2020 to postpone the entry into force of the new regulation by 6 months.

In future, for all small shipments Customs declarations be handed in. So that this does not lead to an overload of customs, the shipments will in future be automated in the IMPOST process ( background ) processed.

In addition, an import sales tax is charged from a value of 1 cent. It is planned that the report will be made via a central contact point (one stop shop).

What is the goal of changing the import process for small packages?

E-commerce in particular has led to an enormous increase in small shipments from non-EU countries, so-called third countries. The legislature has recognized that more and more low values of the goods were given here (under-invoicing) in order to avoid taxation. The tax authorities are thus missing out on massive revenues. Domestic providers also have a disadvantage compared to foreign competition, as they do not benefit from this tax exemption.

The aim of the legislature is to strengthen the domestic economy. By eliminating the tax advantage for non-EU providers, domestic orders should become more attractive.

Another goal of the reform: to be able to take action against mail order companies who want to avoid the import sales tax by deliberately lowering the value of goods. Customs are already carrying out key checks to detect under-invoicing. The new regulation will make it easier for the customs administration to take action against fraudsters.

What do the changes mean for small items?

For all small consignments from third countries, the importer must make electronic customs declarations from July 1st, 2021 – but with an extremely reduced data set. For this purpose, the ATLAS-IMPOST specialist application is being developed for mail and courier deliveries up to a value of 150 euros. A new customs declaration type APK (declarations of postal and courier shipments with a goods value of up to 150 euros) is being created for ATLAS participants.

Private customers are also affected by the VAT reform: In future, they will have to submit a customs declaration (IPK = Internet registration for mail and courier shipments with a goods value of up to 150 euros). Private customers who do not want to register online for this at the citizen and business customer portal can still be “represented” by the post office, courier service providers or others for a fee.

How the import sales tax should be levied is still unclear. After clarification of the details on February 12, 2020 at European level, a ministerial draft for national legislative implementation is not expected until autumn 2020 at the earliest. One thing is certain, however: in order to avoid multiple registrations for sales tax purposes in the so-called country of destination (the customer’s country of domicile as the place of consumption) for entrepreneurs, the system of the “one stop shop” is being expanded. This enables companies to register for sales tax in just one EU member state and collect taxes.