Value Added Tax (VAT)
A consumption tax on the value added to goods/services; charged as import VAT at importation, with special EU rules for cross-border e-commerce.
VAT (Value Added Tax) is a consumption tax charged on the value added at each stage of the supply chain and ultimately borne by the consumer. In trade, goods entering an importing country usually incur 'import VAT', whose base is generally the customs value plus duty (and certain charges), multiplied by the destination VAT rate.
EU VAT is especially important for Chinese sellers. Rates differ by member state. Since 1 July 2021 the EU abolished the import VAT exemption for consignments under €22 and introduced the IOSS (Import One-Stop Shop): for distance sales of consignments not exceeding €150, VAT can be collected at the point of sale and declared centrally, and non-EU sellers normally must appoint an EU-established intermediary. Holding stock in an overseas warehouse and shipping locally (e.g. FBA) typically requires VAT registration and filing in the relevant country.
Notes and pitfalls: import VAT and duty are two different taxes; in many countries import VAT is recoverable as input tax by VAT-registered businesses but not by final consumers. Failing to register/file VAT correctly can lead to marketplace restrictions or tax-authority penalties. Actual rates and registration thresholds are set by the destination tax authority.
FAQ
- Do I always need to register for VAT to sell to the EU?
- It depends on the model. For direct-mail consignments up to €150 you can use IOSS to collect VAT at sale; if you stock and ship locally from an EU warehouse/FBA you normally must register and file VAT in the relevant country. Confirm with each member state's tax authority.
- What is the difference between import VAT and customs duty?
- Duty is charged on the goods based on HS code and origin; import VAT is a consumption tax whose base is usually the customs value plus duty. They are different in nature and rate, and many countries levy both at importation.
- What is IOSS and do I need it?
- IOSS is the EU's Import One-Stop Shop for distance sales of consignments up to €150, letting you collect VAT at sale and simplify clearance. Non-EU sellers generally need an EU-established intermediary to register and use it.
Related terms
Sources: https://vat-one-stop-shop.ec.europa.eu/one-stop-shop_en · https://taxation-customs.ec.europa.eu/customs/customs-procedures-import-and-export/customs-operations/customs-formalities-low-value-consignments_en