Trade body sorts new EU VAT rules
A local trade body is working to educate its network and find solutions regarding the recent removal by the EU of a value added tax (VAT) exemption for goods imported into the value block. not exceeding € 22 ($ 26), and the Import One-Stop Shop System (IOSS) option created for low value shipments.
Effective July 1, the latest changes to EU VAT rules come at a difficult time for businesses just starting to resume exports after the global slowdown caused by Covid-19, and are another hurdle to overcome for Cambodian companies, after the partial withdrawal of the Everything But Arms (EBA) program of the bloc entered into force on 12 August.
The suspension affects a fifth or 1 billion euros of the Kingdom’s annual exports to the bloc of 27 nations.
On the other hand, the changes are part of the EU’s attempt to simplify and modernize VAT rules for cross-border e-commerce within the bloc.
The European Commission (EC) has stated that the IOSS “was created to facilitate and simplify the declaration and payment of VAT for distance sales of goods imported into the EU with a value not exceeding € 150 “.
“If you sign up for IOSS, your customers will appreciate that the price they pay is the final price, including VAT, with no hidden fees or charges.
“If you do not register for IOSS, VAT will be paid by your customer when importing goods into the EU.
“Postal operators or couriers may charge the customer additional customs clearance fees to collect this VAT and complete the necessary formalities when importing the goods,” he said.
The President of the European Chamber of Commerce in Cambodia, Tassilo Brinzer, told The Post that the long-term administrative benefits of IOSS outweigh the impact of the loss of VAT exemption and flexibility now required of companies.
“Consumers will know in advance what to pay if the seller is registered under IOSS and will no longer be surprised by taxes on receipt – trust is extremely important in online commerce,” he said. .
He explained that traders can file a single VAT return for the entire EU and make a single tax payment.
Sellers using online marketplaces should be aware that the responsibility for VAT now rests with the platform – so collecting and reporting VAT is no longer the direct responsibility of the trader, he said. .
Although the new rules will probably require some adaptation, they are “much more than the loss of the VAT exemption”, and “will generate positive effects”, he added.
“We are actively working with our ICT committee and our transport and logistics committee to discuss the new rules with our members and how they can comply.
“Many large companies have been anticipating these new rules for months – mixing them with our SMEs [small- and medium-sized enterprises] and the individual entrepreneurs on our committees provide excellent interaction, ”said Brinzer.
He explained that lifting the VAT exemption for importing low-value commercial goods into the EU makes business-to-consumer (B2C) transactions with Europe more expensive.
However, he added, the new rules only affect the market for goods worth less than € 22 – goods above this threshold were already subject to VAT.
“As for the IOSS rules, of course they raise a lot of new concerns. However, for a large part this will also mean administrative simplification for a majority of companies, ”said Brinzer.
Darren Sun, director of eCommerceatShip24.com, an international company that supports electronic retailers (e-merchants) and marketplace merchants, says the IOSS program will have a huge impact on Cambodian businesses that use e-commerce to sell to EU buyers.
“The problem for Cambodian online traders is that they will need to register with an IOSS tax intermediary, which must be based in the EU, in order to access the benefits offered by the IOSS program.
“This has left Cambodian e-merchants scrambling to figure out how to register for IOSS representatives,” he said.
Representing 45% of Cambodian exports, the EU was the Kingdom’s largest trading partner in 2018, according to the EC.
Most exports (95.7 percent) entered the EU market under the EBA tariff preferences.