Purchase of non-EU products with a value of less than €22 is no longer exempt from VAT. Find out about the changes in VAT on imports.
Changes from 1 July 2021
From 1 July 2021, a new law on the application of VAT to low-value products imported from non-EU countries will come into force in all EU countries.
In simple terms, until now, imported products worth less than €22 were exempt from VAT. From now on, this exemption is abolished.
If until now you could buy a product from China, at a low price, and did not have to pay VAT, now it is no longer like that.
However, the exemption from customs duties for purchase values up to and including €150 is maintained.
Below are more questions and answers that will be useful to you.
What is considered an imported product or a product from a non-EU country?
It is a product whose origin is from a country outside the European Union. For this context, the changes to the law apply to products that are sent directly from a non-EU country to a recipient in the European Union. It applies when the seller is a company, and the recipient can be an individual (B2C) or a company (B2B). It does not apply to shipments between individuals.
Is the United Kingdom a non-EU country?
Yes, since January 2020 the United Kingdom has been a non-EU country. At an initial stage, the processes for the movement of goods maintained the simplification of procedures that applied to the countries of the European Union. In 2021, this simplification ended and the same rules that are applied to other non-EU countries, such as Brazil, the USA or China, began to apply.
What is the value of the commodity? Or, to put it another way, what value is considered for the collection of VAT and customs duties?
For the collection of VAT and customs duties on imports, the value of the goods is considered, and this is the intrinsic value provided for in paragraph 1 of article 48 of the UCC-AD. That is, VAT applies to the price of goods when they are sold for export to the European Union. Transportation and insurance costs, if any, are excluded from the price of the goods, except if these costs are included in the final price and not individually described in the invoice, in addition to other impositions and charges that can be determined by the customs authorities from documents they consider relevant.
Who charges me VAT?
VAT may be charged directly by the seller at the time of purchase or by the carrier/importer on behalf of the customer at the time of delivery of the product.
If the transaction is carried out from a company to an individual (B2C) and the value of the goods is less than €150, VAT can be charged directly by the seller:
If the transaction is carried out between two companies (B2B) or the value of the goods is greater than €150 or the seller does not want to register for the IOSS VAT number, the VAT will be charged by the carrier/importer on behalf of the customer or the company will deliver it in its periodic declaration:
And will samples and tests also pay VAT? Is there any franchise situation? Are there exceptions to paying VAT on low-value goods?
There is only one Franchise option (this is the term used for a good to pass through customs without paying VAT and customs duties). This option is the import of samples and tests framed in Articles 86 and 105 (of Regulation (EC) No. 1186/2009 of the Council of the EU of 16 November 2009 establishing a Community system of customs relief) with authorization to mutilate. Mutilation means that customs can damage the integrity of the goods, i.e. make a hole, seize one of the shoes of a pair, etc.
(Whoever is sending the goods (seller) must indicate this situation in the document that accompanies the shipment. Customs only reviews the information contained in the accompanying documents of the goods; It doesn’t parse labels.)
What is Formal Customs Clearance, who does it process and when is it necessary?
The Formal Customs Clearance is a document necessary for the customs clearance process. Whenever there is payment of taxes there is a formal customs clearance process. This document is handled by the importer/carrier directly with the Customs Authorities, which then charges this service to the recipient customer. Until June 30, Formal Customs Clearance was only required when the value of the goods was greater than €22. As of July 1, 2021, goods of any value will require Formal Customs Clearance, even if their value is less than €22. Remember what is considered the value of the commodity in one of the answers above.
A Formal Customs Clearance applies for each shipment.
From July 1st, all shipments imported into the EU will require Formal Customs Clearance.
Who are the most targeted with these measures?
Individuals. If until now you could buy a product from China, at a low price, and did not have to pay VAT or Formal Customs Clearance, now it is no longer like that.
Does it mean that my purchase will be more expensive?
In fact, if you are a private individual, you need to consider before making a purchase from a company outside the EU.
Even before these changes to the law, and as a private individual, when you made a purchase from a non-EU country, you had to consider:
Now the Formal Customs Clearance – which includes the information that serves as the basis for the payment of VAT – is mandatory for any value of goods.
This means that even if your goods have a value of only €2, you will have to pay a Despach. This process is a service, with an associated cost and its cost varies between carriers. Alfaloc has one of the most competitive prices on the market.
Can all companies obtain the IOSS VAT number?
The IOSS VAT number is only applicable to companies based outside the member states and without representation in the EU. Companies not established in the EU will have to designate an intermediary (a tax representative) to be able to apply for the IOSS and for this entity to comply with the periodic VAT return on their behalf, with the EU Tax Authorities. This process is advantageous for selling companies because they only need a VAT number that they can use for sales to any member state, rather than having a VAT number in each member state, as was previously required.
But is there still exemption from customs duties? When?
When the value of the goods is less than or equal to €150, the exemption from the payment of customs duties that already existed before July 1, 2021 is maintained.
Does it mean that if I buy several products, each of which costs less than €150, I won’t pay customs duties?
No, necessarily. The law on customs duties is applied to the total value of the consignment. If you make a purchase of a total value equal to or greater than €150, you will have to pay customs duties, even if that purchase is made up of elements of very low individual value.
What if my purchase is worth more than €150?
For purchases over €150 there is no change in the rules in force before and after July 1st. The application of customs duties and VAT that already existed before July 1, 2021 is maintained.
Do shipping costs also count towards the VAT calculation?
No, if they are identified on the invoice. Shipping costs are not part of the value of the product and therefore do not count for the calculation of VAT, except when it is not possible to read the value of the shipment separately on the invoice of the goods. This situation can happen with “free shipping” shipments.
What if the seller says “free shipping”, how do I do it?
Sellers always have costs to ship the goods. However, it is very common to see the information “free shipping” or “free shipping” from a certain amount of purchases because this condition influences the customer to buy more products until they reach free shipping. The final value that the seller shows you may be the value considered as the value of the goods, and which you will use to calculate VAT. (See the answer to the question “What amount is considered for the collection of VAT and customs duties?”)
Do these rules apply to all imported products?
Not exactly all. These rules apply to goods subject to the customs procedure for release for free circulation and consumption and to goods which are not subject to prohibitions and/or restrictions.
How do I calculate the VAT I will pay?
VAT – value added tax – applies to the base value of the product or set of products you are buying. If you are in mainland Portugal, do the following calculation: value of the goods x 0.23. The result is the amount of VAT payable.
Do I need to fill out any documents?
No, you do not need to fill out any additional documents. But if you paid VAT at the time of purchase, you have to safeguard that the commercial invoice that accompanies the shipment has the IOSS VAT number of the company that sold you the product. It is this company that has the obligation to pay VAT. If you pay VAT at the time of purchase and the commercial invoice does not have the seller’s IOSS VAT number, you run the risk of having to pay VAT again during the customs clearance process of the goods.
If this law applies to all countries in the European Union, and these countries have different VAT rates, what VAT rate will I pay?
The VAT rate of the country of destination of the import is applied to the product. If you import the product into Portugal, the VAT rate will apply in Portugal. If you import the product into another EU country, for example Spain, Spain’s VAT rate will apply.
In Portugal there are different VAT rates: 6%, 13% and 23%. Will my product always pay 23% VAT?
The rates of 6% and 13% apply to products considered essential, according to the Official Gazette. Imported products are not among the products covered by these tariffs, so the 23% rate will apply.
Where can I consult the official pages?
European Union Website https://ec.europa.eu/taxation_customs/business/vat/ioss_en
Diário da República Portuguesa https://dre.pt/application/conteudo/140950562
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