Ylenia Attard spoke to MaltaPost Chief Operating Officer Adrian Vassallo about the new VAT regulations coming into force on the 1st of July
What are the new laws being added on for online shopping from non-EU countries as of today, 1 July?
The European Commission has amended EU Directive 2006/112/EC, such amendments will come into force today and shall affect the Customs and VAT rules applicable to cross-border business-to-consumer (B2C) e-commerce activities. In a nutshell, the current VAT exemption upon importation of small consignments up to €22 will be removed and customs controls on such consignments introduced. A new special scheme for distance sales of goods imported from third countries of an intrinsic value not exceeding €150, referred to as the Import One Stop Shop (IOSS), will also be created and simplification measures in customs clearance of imported goods in consignments not exceeding €150 will also be introduced.
How will these new tax laws affect the ordinary consumer and will the public be aware of the price beforehand?
These new VAT regulations will benefit Maltese online shoppers for goods with a value not exceeding €150 purchased from non-EU websites and platforms, since these changes mean that there will be no extra charges at Customs if the seller is registered within the new VAT system and uses the Import One Stop Shop (IOSS). Maltese consumers will be sure of the final price they pay online with no surprise taxes and processing fees upon delivery, unless there are issues with Customs. This means that for Maltese consumers, the overall cost of an item with an intrinsic value between €22 and €150 being delivered by MaltaPost will be less than the current cost since processing fees will be waived by MaltaPost, notwithstanding that MaltaPost would still need to do the Customs declarations for these consignments. This also means that the online shopping experience, whether consumers purchase within the EU or outside, will be identical. When a consumer buys from a supplier who is not registered in the IOSS, the consumer would be required to pay VAT and processing fees charged by all European postal and courier operators when goods are imported in the EU. The most convenient option for local consumers is to choose non-EU sellers that charge and collect VAT at the point-of-sale. Maltese consumers may find information on whether VAT is included or not on the seller’s website, usually in the delivery details or in the FAQs.
What has MaltaPost done to prepare for these changes?
The changes that are coming into force will result in an increase in the number of Customs and VAT declarations that need to be submitted. MaltaPost has prepared for this change by investing in new IT software to handle this increase. Preparations had already started in January with the mandatory transmission by all postal administrations of electronic messages containing Customs-related information normally written on the familiar CN22/CN23 Customs declaration form. MaltaPost has subsequently integrated this electronic message with our parcel management software and with the Customs’ National Import System, resulting in a faster clearance process.
How do you think MaltaPost will be affected?
Unfortunately, the European Commission has not included a transition period for these changes and therefore VAT and carrier charges will have to be paid for goods ordered before 1 July but imported on or after this date. Hence, we are expecting that, initially, there will be a slight drop in orders coming from non-EU countries as consumers will stop ordering from these countries following the payment of VAT and the carrier’s processing fee on their orders done before 1 July but arriving in Malta after this date. However, once consumers realise that the most popular non-EU websites and platforms are registered in the IOSS and are therefore collecting VAT at the point-of-sale, with no additional charges in Malta unless there are issues with Customs and they are having the same shopping experience as when ordering from EU websites, then the number of orders coming from non-EU countries are expected to return to current levels.
What are the benefits of these changes? Do you think local businesses can benefit if international purchases decrease?
The main aim of these changes is that local businesses will be able to compete on an equal footing with non-EU businesses, which were not charging VAT before 1 July. These changes are therefore beneficial to local businesses. We can help local businesses by offering our eSeller service, a complete e-fulfilment solution which provides an easy-to-use platform to help local businesses with the increase in sales, to streamline their business and to expand to new local and international markets.