Big changes across borders! EU tax reform is about to take effect. Will the era of double-clearance tax package end completely?

After the EU VAT reform came into effect, in addition to B2B corporate orders , Chinese sellers who use third-party platforms for sales can pay taxes at the EU border for a very small number of 150 euro net price orders shipped from outside the EU . The VAT tax on nearly all orders will be intercepted by the platform and directly transferred to the tax bureau . For platform sellers, the previous means of reducing costs such as double customs clearance and tax package are no longer feasible. How can platform sellers find new ways to reduce costs under the premise of transparent customs clearance ? This is a problem that needs to be solved urgently.

In addition to platform sellers, independent site sellers are also affected by the EU tax reform. The tax reform poses different challenges to sellers of different sizes. Taking small and medium-sized sellers as an example, whether IOSS itself will be stolen, resulting in the monthly declaration summary being inconsistent with the customs statistics, is a core point worthy of attention.

Under the tax reform environment, logistics companies cannot stay out of it. The new policy will inevitably force logistics companies to provide their own IOSS numbers and assume more tax responsibilities and risks. This requires logistics companies to have new adaptability and reform capabilities in terms of cost structure, level and internal control mechanism .

In fact, in the European market, with July 1 as the dividing line, the EU's major VAT reform affects various roles such as e-commerce sellers, platforms, independent sites, and logistics companies. Tax costs, business models, operating models, and internal control frameworks will undergo tremendous changes .

The current situation and changing trends of platform sellers

When using FBA warehouses and third-party overseas warehouse delivery services, sellers may still maintain the double-clearance and tax-inclusive model, combining import taxes and freight into an overall first-leg expense. The cost management structure has been simplified, but this long-term under-reporting customs clearance model brings more uncertainty to the supply chain stability of sellers with long preparation cycles.

Using your own tax number to perform indirect customs clearance in the destination country and advance payment of import VAT will affect liquidity to a certain extent. Under the background of the platform deducting taxes, no additional sales VAT will be paid or the payment value is very small. The input tax paid in advance will be changed from the previous deduction to a tax refund that may be applied for frequently. This action is often easy to lead to the review of the tax department, that is, the review of the standardization and validity of the input bills and the authenticity of the sales history tax returns. If the situation worsens, the inventory and the euro account will be frozen for no less than 2-3 months.

By deferring the shipment to the destination country through countries such as Belgium and the Netherlands, the import VAT can be deferred and one-stop tax processing can be carried out in the destination country. This helps to ease the financial pressure and smooth customs clearance. In practice, many medium-sized sellers have reported that they were ordered by the customs to pay a high deposit and eventually gave up the case of reclaiming it in order to avoid a full review. In the destination country, as the tax processing agency of the final destination of the goods, Taxeuro German One European Accounting Firm often encounters examples of import documents being lost or unconsciously requested from the freight forwarder , triggering inquiries and tax collection by the tax department .

For sellers who use the direct delivery model, new strategic models need to be designed for product pricing to offset the new costs caused by the increase in the base for calculating taxes and commissions. In the tax-free customs clearance model using the IOSS number provided by a third-party platform , the platform has implemented a new policy of "IOSS + unique order number + proof of withholding tax" for delivery notes, which has brought new resource allocation challenges at the technical and management levels.

In summary, for sellers, the sales VAT is fixed and no longer plays a role in optimizing and adjusting profit margins. More approaches are to shift the focus of tax operations and maintenance to the tax-related operation nodes of the supply chain, perform more refined management, and use the improved supply stability and efficiency to turn them into comprehensive cost advantages . There are some practical cases where leading e-commerce companies have leveraged their own economies of scale and transparent customs clearance to gradually achieve a 3%-5% cost reduction.

Regarding the operational aspects and practice environment of the tax-related part of logistics

As the tax compliance awareness of e-commerce sellers is gradually awakened and enhanced, the demand for local customs clearance of own tax numbers and deferred customs clearance transit mode in other places will inevitably increase sharply. Taxeuro, a German accounting firm, learned from the exchanges with relevant persons in charge of some leading logistics companies that the deposit fees generated by the liability guarantee required for non-EU companies' goods to enter the EU are usually borne by logistics companies, and therefore come with greater legal responsibilities, making compromises to create better customer acquisition conditions. It is true that the fierce competition in the logistics industry is very cruel.

As mentioned above, the standardization of import bill information, quantity integrity, and delivery time involved in FBA warehouses and third-party overseas warehouses are likely to affect the tax treatment of e-commerce sellers in the later stage. The gap in the amount of declaration will lead to disputes over the division of responsibilities . At the same time, sellers and customs clearance companies will face certain risks. Therefore, these indicators and factors are particularly important for logistics companies that want to build a better and more meticulous service system.

For orders of direct-sent small parcels that are not from e-commerce platforms, the EU tax law reform stipulates that taxes must be paid in the destination country. Therefore, the parcels should be cleared in the country where the consumer or recipient is located. Obviously, the conditions for this are not met in terms of cost and customs clearance resources. In order to adapt to the market and maintain the original dedicated line service standards, customs clearance is centralized and then dispatched. The new policy will inevitably force logistics companies to prepare their own IOSS numbers, bear more tax responsibilities and risks, and have the ability to adapt and reform the cost structure, level and internal control mechanism.

Due to the tax reform, each package must submit a customs declaration. Taxeuro German One Europe Accounting Firm learned that the German Customs has begun to upgrade the system to cope with the situation where customs clearance agencies will submit a large number of customs declarations in the future.

However, due to development progress, this system will be put into use on January 15, 2022. After July 1, customs clearance agencies will temporarily use the Excel spreadsheet mode to submit customs declarations as a transition.

For independent website sellers, there are different requirements for scale and development stage

Small and medium-sized sellers are naturally not supervised by local departments, and most of them are in the direct delivery mode. They need to apply for IOSS numbers for logistics companies to do tax-free customs clearance. Whether IOSS itself will be misused, resulting in the monthly declaration summary not being consistent with the customs statistics, being held accountable and implicating tax representatives, is a core point that deserves attention.

For large-scale, branded independent station companies, tax compliance is a topic that must be faced during the financing and listing stage. They need to find a responsible person in the EU to act as a guarantor and apply for OSS for one-stop tax reporting in Europe. The price setting system must synchronize the VAT rates of EU countries, and accordingly, it must be embedded in the automatic invoicing function to form a closed loop of tax operations before and after sales.

Regarding the development direction of third-party e-commerce platforms after announcing IOSS numbers

For example, Amazon and Ebay will gradually publish IOSS numbers for tax-free customs clearance of overseas direct orders. At the same time, tax returns must be submitted to the tax authorities of the country where they are registered every month to pay taxes. The numbers are open to the entire network and there is no feasible control method for the time being. When the IOSS number itself is cleared by the customs department and its validity is confirmed, the logistics company and customs clearance company will not bear any tax liability, and will not interfere with the verification of whether the package is sold through a third-party platform and the tax deduction is completed, which also consolidates the customer relationship.

Obviously, some independent station orders rely on the e-commerce platform IOSS for customs clearance, which will inevitably lead to deviations in the comparison between the import amount declared by the platform and the summary of customs clearance data of 27 countries, resulting in a tax gap.

Therefore, in case IOSS may be abused, Taxeuro, a German accounting firm, predicts that the platform may require that overseas direct parcel orders must be processed by designated customs clearance companies , and use "IOSS + unique order number + tax deduction success certificate" as a new identification mechanism to avoid IOSS abuse.

Looking at the changing trends in the mechanism of the entire European e-commerce ecosystem, various infrastructure service providers must have a set of feasible and consistent execution standards for reference in their tax-related work, including but not limited to the setting, review, processing, transmission, and monitoring of declared data, as well as related necessary operating procedures and corresponding supporting documents, to play a coordinating and unblocking role in the entire supply chain to ensure stability and efficiency.

for example:

The declared value for import customs clearance is in accordance with the standards, the standardization and completeness of customs declaration information, and the timeliness of the transfer of import tax bills;

The compliance of the cargo ownership agreement in terms of transshipment and warehousing , and the main agreement between the parent and subsidiary companies on warehousing operations;

The logistics tracks and bills for delivery and after-sales , the accounting procedures related to multilateral transaction remote sales orders, etc. are all worth exploring and testing, so as to build a tax compliance operation and maintenance mechanism that is conducive to the stable and efficient operation of the entire chain.

The editor learned that Taxeuro is the only German accounting firm officially recommended by Amazon, which can provide the best European VAT overall solution. From June 28 to June 30, 2021, Taxeuro will conduct a three-day live broadcast event . The details are as follows:

Readers can also click on the link: https://www.ennews.com/article-22218-1.html for more details!