Do you buy goods in e-shops outside EU? Small purchases of goods from abroad will become more expensive soon. A beneficial tax treatment for parcels with value up to EUR 22 is about to end.
As of summer 2021, several changes in the area of e-commerce are about to be implemented (we have covered them in more detail here). The package of law changes also includes a change in customs procedure relating to import of small parcels from abroad by end consumers. You will be impacted by these changes if you buy goods via e-shops based in third countries outside EU (e.g. US or China).
The current regime
Currently (June 2021), parcels shipped as part of e-commerce from third countries outside EU break down into three groups. How and whether the consumer pays VAT and customs duties is determined by the value of the shipment.
- Parcels of up to EUR 22 in value – exempt from VAT and custom duties.
- Parcels of EUR 22 up to EUR 150 in value – exempt from custom duties, subject to VAT.
- Parcels of over EUR 150 in value – subject to VAT and custom duties.
This relief does not apply to entrepreneurs (individuals and corporations). Goods purchased by entrepreneurs are subject to a standard custom procedure regardless of the value of goods, and are thus subject to both VAT and customs.
What’s the practice? As an end customer (non-entrepreneur), you purchase goods from an e-shop with place of business outside EU with value of up to EUR 22 and you pay for shipment to the Czech Republic via post or a consignment service. The parcel is subjected to a simplified customs procedure by the post or consignment service and is exempt from VAT and custom duties. As a customer, you are not subject to any procedures or extra fees.
If you order parcels with value of EUR 22 – 150, they are subject to a standard customs procedure by the post or a consignment service. You pay VAT from the value of the parcel, but it is exempt from custom duties (apart from exceptions – alcohol, tobacco products etc.).
For parcels with value exceeding EUR 150, you pay VAT and custom duties, and the parcels are subject to a standard custom procedure.
New rules – VAT exemption
When the new VAT amendment comes into force, the current regime will change (the change is planned with effect as of 1 July 2021, but the legislative process of the relevant tax law has been slow and nobody knows when it will be enacted. This will likely not happen by the end of June 2021).
The bad news is that the VAT exemption will be abolished for small parcels with value of up to EUR 22. Small parcels will therefore be subject to a procedure which has henceforth been reserved for parcels with value of up to EUR 150.
For every such parcel, it will be necessary to file a custom declaration using a digital eCeP application. The buyer will input all the relevant data in the app and will file the custom declaration digitally. Based on the declaration, the custom authority will assess VAT and the goods will be released into circulation in the Czech Republic only after its payment.
You will find more detailed information on the website of the customs authorities at Celnička. eCeP portal will come on-line as of 1 July 2021 and as of that date you can already use it for parcels of EUR 22 – 150 in value.
If, for any reason, you cannot file a custom declaration digitally using eCeP, it will still be possible to have post handle the custom procedure on your behalf or to be represented in the custom procedure by your carrier, for a fee.
Purchase through IOSS
In case of parcels with value of up to EUR 150, there is another possibility which could speed up the entire process. This will apply in cases where the foreign e-shop has registered for the special regime of a single administrative place for import (Import One Stop Shop – IOSS, as covered in our article here). This works in a way that the foreign vendor registered for IOSS pays VAT directly on behalf of the end customer. This would save administrative burden to the customer and the VAT would be included by the vendor in the price of their goods.
This alternative will not save you any money, but it will simplify the entire process of purchasing the ordered goods and will speed up the entire process. As a consumer, you will not be able to influence whether VAT will be settled in this manner, or when the goods is shipped. However, it is good to keep in mind that you do not have to handle the VAT payment yourself. Even when buying through IOSS, you are still obliged to file a custom declaration e.g. using the eCep app.
Last but not least – in case of IOSS regime, VAT from parcels with value of less than EUR 22 will already be levied as of 1 July 2021, based on the direct effect of the European VAT Directive.
Changes as of 1 July 2021
Although a VAT law amendment repealing the VAT exemption for small parcels will not be in effect as of 1 July 2021, some small changes when importing goods will already be felt as of this date. This is due to the fact that, as of 1 July 2021, the Customs Codex has been amended. The Codex is applicable through the entire EU and the slowdown of the legislative process in the Czech Republic is thus not relevant. It is applicable directly without a need to amend the national law. What does this mean in practice?
First, even small parcels with value of up to EUR 22 will no longer be processed through a simplified customs regime, as has been the case until now (even if VAT is not yet levied):
- If the parcel is shipped using an express shipment service, the digital custom declaration has to be filed by the carrier;
- If the parcel is shipped by post, an exemption applies until 30 September 2021 (or until the VAT law amendment comes into force – whatever occurs earlier) whereby the filing of the digital custom declaration for parcels not exceeding EUR 22 in value will not be obligatory;
- If the parcel is purchased via the single administrative place for import (IOSS), you can use the eCeP app (in such case the above exemption for post does not apply).
Big purchases and entrepreneurs
For goods with value exceeding EUR 150 and for parcels meant for business, there is no change in practice. The goods will continue to be subject to a standard custom procedure whereby VAT and custom duties will have to be paid.
Are you overwhelmed by all the upcoming changes in tax obligations? We will be happy to advise you how to fulfill tax and custom obligations in the quickest, most economic and simple way possible.