1. Online Seller Meetup – Manchester
Alan M. Rhode
27 September 2017
BREXIT: What happens now for multi-channel and
eCommerce retailers? – an insight on VAT & Customs

2. Crossborder e-commerce
VAT/ Sales Tax
E-SHOP
2
Customs duties
Paperwork

3. Brexit
• Following the outcome of the June 2016 referendum
and the start of the withdrawal procedure, the United
Kingdom will exit the European Union on 30 March
2019.
• The procedure is irreversible, say EU institutions.
• Unless otherwise agreed, from that date the UK will no
longer be part of the European Single Market and of
the European Customs Union.
• Huge impact on crossborder ecommerce between
the two areas.
• The Ireland/Northern Ireland question.
3

4. Current B2C framework
• The UK is still part of the EU Customs Union.
• Hence, customs duties do not apply shipments
between the UK to the EU..
• Shipments are subject to VAT under the EU distance
selling regime (country of dispatch vs. country of
delivery)
• Shipments to non-EU countries are VAT exempt in
UK/Europe. They may be subject to duties /VAT in the
country of destination, unless a small consignment
exemption and/or a Free Trade Agreement (FTA)
apply.
4

5. Current B2C framework (2)
• Main VAT scenarios for B2C e-commerce sales within
the UE:
1. Shipment UK to EU: the “distance selling”
regime applies. If the UK merchant does not
exceed a specific yearly threshold in shipments
from the UK to the EU destination country
(35k/100k), UK VAT is applicable. Otherwise, after
the threshold is met, VAT starts applying in the EU
destination country.
2. Amazon FBA warehouse (EU): VAT applies in the
EU state where the warehouse is located, even on
crossborder EU parcels, unless the distance selling
thresholds are met.
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6. Current B2C framework (3)
6
UK
FRANCE GERMANY
USA
No customs duties.
***
< Eur 35k of yearly shipments
to France: UK VAT.
> Eur 35k: France VAT starts
to apply
No customs duties.
***
< Eur 100k of yearly shipments
to Germany: UK VAT.
> Eur 100k: German VAT starts
to apply
No customs duties.
< Eur 100k of yearly shipments
to Germany: French VAT.
> Eur 100k: German VAT starts
to apply
➤
No customs duties or VAT in
Europe
***
Inbound customs duties and
VAT in USA. $800 small
consignment exemption.
➤
➤
➤
B2C – No
triangulation

7. After Brexit?
• Main, alternative post-Brexit settings:
1. No UK/EU Free Trade Agreement (customs duties
+ VAT in the country of import);
2. UK/EU Free Trade Agreeement (only VAT, no
customs duties for preferred-country products);
3. UK/EU Customs Union: goods moving between
the UK/EU would be treated as they are now for
customs purposes.
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8. 1. No UK/EU Free Trade Agreement
• If no UK/EU agreement effective as of the withdrawal
date, cross-border trade between the UK/the EU will
be subject to customs duties and VAT in the country of
import.
• There is currently a EU small consignment exemption
for customs purposes (<Eur 150) and VAT (<Eur
10/22). The VAT-exemption is likely to be removed
from 2021 (see slide 13).
• Will the UK apply a small consignment exemption?
• All cross-border parcels will need to be accompanied
by an invoice for customs purposes.
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9. 2. Free Trade Agreement EU/UK
• If the UK and the EU enter into a Free Trade Agreement
(FTA), at specific conditions cross-border shipments of
products originating from the UK/EU will not be charged
customs duties.
• Non-EU/UK products originating from other countries
(e.g., China, the US) will be subject to customs duties in
the country of importation, save exceptions.
• Will the UK sign FTAs with other countries (e.g. China)?
• Import VAT will still apply in the UK/EU. An important
reform on e-commerce import VAT in Europe is expected
to become effective in April 2021.
9

10. 3. UK/EU Customs Union
• Solution envisaged, among others, by the UK Goverment
in a Aug 2017 paper.
• The solution outlined by the UK is quite unprecedented,
as the UK would hold the right to sign different trade
arrangements with non-EU countries.
• No trade border between the EU/UK.
• Would the EU VAT distance selling regime still apply in
the UK?
• An alternative would be a "highly streamlined customs
arrangement". Meaning: customs clearance procedures,
but fast and highly automatised.
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11. After Brexit: exports outside the UK
• Unless otherwise agreed by the EU/UK, after Brexit, sales
to European consumers will be considered as VAT zero-
rated in the UK.
• The EU distance selling scheme will no longer apply.
• Merchants shall meet certain conditions before zero-rating
exports. These conditions cover the evidence (either
official or commercial) to prove entitlement to zero-rating,
time limits in which the goods must be physically exported
from the EU and time limits in which merchant must obtain
evidence of export to support zero-rating (VAT notice
703).
11

12. Exports outside UK
• B2C Parcels shipped from the UK to EU countries may be
subject to customs duties/VAT (import duties) at the
foreign border.
• Two alternatives (before the 2021 EU VAT reform):
1. Import duties/VAT are paid by the customer (DDU):
this solution can lead to a delay in the delivery,
customer unsatisfaction and other issues; or
2. Import duties/VAT are embedded in the retail price and
paid by the merchant through a customs broker/tax
representative (DDP).
• No customs duties with a Free Trade Agreement.
12

13. 2021: EU VAT reform
• A VAT Directive proposal to reform VAT on e-commerce is
pending approval.
• According to the current version of the Directive proposal,
in 2021 the EU VAT small consignment exemption for
imported parcels will be removed.
• Non-EU merchant will apply/collect VAT at the point of
sale and pay the EU state of consumption via an EU
intermediary (e.g. courier, postal operator?).
• For products sold by non-EU merchants on marketplaces
+ imported to the EU, the marketplace would act as the
VAT subject/witholding agent.
13