VAT changes on EU orders from 1st July 2021 - what you need to know.

From 1st July 2021 new rules come into effect on how (and who) calculates, collects and remits VAT on orders that are shipped to the EU. These rules differ depending on whether you are selling into the EU via an Online Marketplace (like eBay or Amazon) or whether you are selling directly into the EU (through a website for example).

This article will assist you to configure your Tradebox One software in advance of these changes and the forthcoming Tradebox One upgrade that will allow users to correctly calculate VAT on EU orders from 1st July 2021.

If you are using Tradebox Finance Manager you will need to upgrade to Tradebox One. Full details on how to do this can be found at https://help.tradebox.co.uk/hc/en-gb/articles/360021545771.

Tradebox One Changes

• In the Details section of each sales channel in Tradebox One there is a new field called "Ignore Orders Dated After". If you cannot see this field you will need to upgrade Tradebox One to the latest version. You can determine what version of the software you are using by going into the Support page in the Tradebox One application.

Enter 30/06/2021 in this field and choose Save to prevent any orders being downloaded after this period. Once you are satisfied that all orders prior to 01/07/2021 have been downloaded you can install the new build of Tradebox and remove this setting.

How is VAT on EU orders changing

With effect from 01/07/2021 the responsibility for calculating collecting and remitting VAT on EU orders is changing. This is based on a number of factors including the platform the order is sold on and the total value of the order. Generally, for sellers in England, Scotland and Wales, this can be broken down as follows:

Online Marketplaces: 

• Where the order value does not exceed €150 the online marketplace (OMP) will be responsible for calculating, collecting and remitting the VAT to the destination country the order is being shipped to. Orders that meet this criteria would be accounted for as zero rated for VAT in your accounts software.
• Where the order value exceeds €150 the courier/shipping agent will be responsible for calculating, collecting and remitting the VAT to the destination country the order is being shipped to. Orders that meet this criteria would be accounted for a zero rated for VAT in your accounts software.

Direct Sales (websites): 

• Where the order value does not exceed €150 the seller will be responsible for calculating, collecting and remitting the VAT to the destination country the order is being shipped to. Orders that meet this criteria would be accounted for using the destination country's VAT levels in your accounts software.
• Where the order value exceeds €150 the courier/shipping agent will be responsible for calculating, collecting and remitting the VAT to the destination country the order is being shipped to. Orders that meet this criteria would be accounted for as zero rated for VAT in your accounts software.

For sellers based in Northern Ireland, which in effect remains part of the EU customs union, VAT will be due on sales shipped to the EU at the rate applicable in the destination country regardless of value.

The new Tradebox One software

Tradebox will be releasing a new build of the software on or after 1st July 2021 with a new VAT calculation engine to address these changes. The VAT calculation engine in this build is fundamentally different from the existing build and should only be used for orders dated after 30th June 2021. New controls will appear in the VAT tab of each sales channel entitled, "EU VAT Calculation Method". The options will be as follows:

• Zero Rated VAT EU Orders: This should be applied to channels that import orders from online marketplaces (OMP). All orders imported with this method will be calculated as zero rated for VAT as the VAT on all EU orders from these channels, regardless of value, have already been calculated, collected and remitted by the OMP. This option can also be used for all channels if you do not join the Import One Stop Shop (IOSS) scheme.
• Countries Table on Orders not Exceeding €150: This should be applied to channels where the seller is responsible for calculating, collecting and remitting VAT on orders that do not exceed €150. Typically this will be direct sales through a webstore. The VAT will be calculated based upon the standard VAT rate held against the EU country the order is being shipped to in the Configuration > Countries within Tradebox. If you sell products that have a 'reduced VAT rate' for a specific EU country these can be added in the Taxation tab of each product record. All EU orders in excess of €150 processed with this method will be zero rated for VAT as the responsibility to calculate, collect and remit the VAT lies with the courier/shipping agent.
• Countries Table Regardless of Value: This option allows the user to apply the standard VAT rate held against the EU country the order is being shipped to in the Countries table, regardless of the value of the order. This option is designed mainly for sellers based in Northern Ireland, who will need to continue remitting VAT on all sales shipped to the EU.