From July 1 companies selling goods valued at €150 (£128) or below to consumers in EU member states will have to charge import VAT. Firms must collect VAT from customers at the checkout.
Even though Great Britain has left the EU, these new changes affect companies here that sell to Europe.
Firms are now required to either sign up for the new import one-stop-shop scheme (IOSS), use an online marketplace that will take care of the charges or pay for the postal service to provide the documentation.
However, those in Northern Ireland are treated as within the EU (due to the Brexit withdrawal protocol) and for businesses trading within the EU, there is the One Stop Shop (OSS) scheme.
Kevin Shakespeare, director of the academy at the Institute of Export & International Trade, said: “For reporting of EU Value Added Tax via OSS and IOSS, e-commerce firms will need to set up a legal entity in an EU country or get an authorised fiscal representative in that country.
“If GB traders don’t register, the ability to provide e-commerce to the EU will be impacted.”
Tax specialists at law firm Withers explained that the changes on distance transactions and the new One Stop Shop regime aims to create a more efficient scenario for businesses selling goods in the EU.
Companies within the EU under the new regime can opt for registration of a VAT number in a single Member State via a web portal and it is hoped the new format will make things simpler.
Withers attorneys Giulia Cipollini and Filippo Molinari added: “It is worth pointing out that the OSS regime is not available for art and antiques dealers who already opted for the VAT Margin Scheme in the UK.
“This could make the IOSS regime less attractive for the art market operators considering that the VAT Margin Scheme is often applied in the framework of 'second hand' artworks and antiquities.”
The changes also mean that items imported to the EU with a value of €22 or less are no longer exempt from VAT. This means that all goods sent directly from Britain to consumers in the EU, both via online marketplaces and sales made directly, are now subject to the local rate of VAT in the customer’s country.
The new system is explained on the Royal Mail website.