The EU’s New VAT System

As of September 1, 2021, the EU (European Union) updated VAT rates for imported products.
The aim of the new rules that entered into force is to move to a much fairer model by standardizing the EU’s taxation system.
The previous system was much more complex compared to the renewed system, and as a result, it allowed unfair competition to arise between European businesses and businesses outside the EU.
Through the newly implemented rules, an equal and fair commercial order has been established for all businesses within the EU and outside the EU.
According to the EU’s new e-commerce rules, products imported into Europe with a value of 22 Euros or less are no longer exempt from VAT.

If we list the three main rules that have come into force across Europe,

• VAT payment has been made mandatory for all businesses and sellers.
• The obligation for non-EU e-commerce businesses to pay VAT has been abolished.
• An equal commercial environment has been provided for offline and online sales transactions.

To give an example of the previous system; if a business sold a product worth less than 22 Euros from France to Germany via online or offline sales, it had to pay VAT.
On the contrary, if a business that was not a member of the European Union sold a product worth less than 22 Euros to Germany, it did not have to pay VAT.

Naturally, this situation was also leading to unfair competition.
For this reason, the EU’s decision-makers and commercial authorities put new rules into force to create equal commercial environments in online and offline trade, with the aim of eliminating inequality between countries and businesses alongside the increase in e-commerce sales.

The EU’s New VAT Rules Dated July 2021

The new and updated rules valid in EU countries have begun to provide a transparent and equal environment for everyone at a single point where imported products are accepted.
With the new regulation that entered into force as of July 1, 2021, significant new changes have been implemented in VAT practices.
Within the scope of these changes, as of July 1, 2021, there is no VAT exemption for any goods imported into EU countries.

As of the specified date, regardless of the product value, the VAT rate valid in the country where the delivery address is located has started to be applied.

In the old system, products with a value below 22 Euros were not subject to VAT and customs duties, while products between 22 and 150 Euros were subject to VAT and customs duties.
With the regulations that entered into force on July 1, 2021, businesses and sellers carrying out exports started to pay VAT and customs duties for products with a value below 150 Euros.
In addition to this, for products with a value above 150 Euros, in addition to VAT and customs duties, the application of customs tax has been made mandatory.

If you are curious about what the European Union’s Trade Law regulations have introduced, you can take a look at our article.