New custom rules – July 1st 2021
As of July 1st, the new EU VAT regulations will become effective. This will have an impact on online sales to private consumers within the EU.
The new custom rules bear major changes as to how VAT is to be handled in the e-commerce industry and is expected to lead to administrative simplifications for companies and offset the distortion of competition in e-commerce for European companies. We have listed some highlights below:
Abolition of the de minimis threshold for imported goods
In effect 1st of July, VAT must be paid on all goods purchased in countries outside the EU. This means the de minimis limit that was previously DKK 80 in DK and EUR 22 in the EU has now been abolished, as all imports are now subject to VAT.
The abolition aims to prove an advantage for European companies, as any purchase on low value goods, for example from third countries, in the future will be subject to VAT no matter the value of the product.
These new initiatives are also expected to reduce the extensive fraud in relation to the indication of incorrect low product values related to imports of goods from third countries. Low value goods therefore also require formal customs clearance, even though goods up to DKK 1150 or EUR 150 remain exempt from customs duties (with the exception of controlled goods such as tobacco, alcohol, ect.).
This also applies even if an item was purchased before 1 July 2021. If an item arrives after July 1st , VAT and transport fee must be paid.
A product price/value must include VAT and taxes
A web shop is obliged according to the EU Marketing Directive (and the Marketing Act) to provide it’s consumers with a product purchase price that includes VAT and other taxes that the customer must pay. It is illegal not to inform any customer of the correct price that includes VAT and taxes before the check out.
EU distance selling rules from July 1st 2021
In effect July 1st this year there will be introduced a limit for EU distance selling, which will apply to both the sale of goods and services to private consumers within EU countries. This new limit is considerably lower than the current national distance selling limits, and the future limit of 10,000 euros today corresponds to approx. DKK 75,000 within a calendar year. As the sender it is important to be aware that this limit applies to all sales within the whole of EU, and no longer per. Country.
This means a total sale of goods and services online that exceeds a value of 10,000 euros, Danish companies must collect VAT in the private consumers’ home country and with the correct applicable VAT rate for the country in question.
It is therefore important that all companies/E-commerce have an IT system set up to be able to handle various local VAT rates depending on the consumers’ country, as many EU countries have several differentiated VAT rates.
At the same time, however, the new rules allow companies that sell goods and services online and that exceed the new lower common EU distance selling limit, to settle for one single VAT registration via an extended One-stop-shop scheme in their home country.
The registration for the One-stop-shop scheme is voluntary, just as it is up to the companies themselves to decide whether they want to keep the VAT registrations they may already have in other EU countries. Please read more here at the Danish Customs regarding the One stop shop.
However, cases where a local VAT registration will still be required might occur, such as when selling goods from a physical warehouse located in another EU country, importing goods from 3rd countries to an EU country other than Denmark, etc.
Danish companies, for which the forthcoming rules are relevant, should therefore review all their current and future activities so they can adapt to them.
For Danish webshops, it is possible to register for the new, expanded One-stop-shop via skat.dk from April 1st.