In this edition of 8 Minutes with Activ8, we're joined by Alex Wyatt, Global Project Manager for our partner Simply VAT. Simply VAT specialise in VAT for e-commerce, and as such, they’ve been following Brexit trade implications closely since Brexit was first proposed. While there is still much to be determined with regard to Brexit trade agreements, Alex provided us with the top action items online sellers need to complete prior to the 1 January 2021 transition deadline.  

Due to the important nature of this content, we’ve decided to forego our usual “8-minute rule” for this episode, but if you only have time for the highlights, you can read them below. 

What options do UK-based e-commerce sellers have when selling into the EU post-Brexit? 

Simply put, UK-based online sellers have three options: 

Importing under Delivery Duty Paid (DDP) Incoterms 

Amazon requires their sellers to import their goods under DDP Incoterms. Under this strategy, the online seller serves as the importer of record, and is therefore responsible for paying import VAT and duty charges. The seller should be VAT registered in each country into which they sell, which allows them to reclaim their import VAT on their VAT return. However, do note that this requires the seller to charge the local VAT rate on their sales. This strategy allows for a better customer experience as there are no additional charges levied on the customer beyond the point of sale.

Sellers importing under DDP are required to register for an EU EORI number (if you don’t have one already, you can get one here). 

Deliver under Delivered at Place (DAP) Incoterms 

With this model, the customer is responsible for paying the duties and taxes upon the goods being imported into the EU. As you can imagine, this is not an ideal customer experience, so if you choose to operate under DAP Incoterms, be sure to communicate this with your customer early and often so they are not surprised by additional charges or delays beyond the point of sale.

Hold Stock in the EU 

By shipping your goods from an EU-based warehouse, you can use the EU Distance Selling Rules to sell cross-boarders within the EU. This means that – as long as you’re operating within the EU Distance Selling Threshold - you only need one VAT registration in the country where your goods are stored. This significantly decreases the cost of compliance for your business and allows you to only charge one VAT and reclaim import VAT in that EU country.  

To learn more about EU-based stock holding, contact Activ8 today to discuss our global warehousing and fulfilment solutions. 

What steps should online sellers take to ensure their business won’t be disrupted? 

• Apply for an EORI number. 

• Review your supply chain. 

• Check the VAT implications. 

• Determine what tariffs apply to your goods (use commodity codes according to the UK and EU). At the time of publication, there has been no trade deal finalised between the UK and the EU. As such, you should assume we will be trading under WTO rules. 

• Adjust your product pricing to reflect any increase in taxes and fees to maintain your margins. 

• Keep all import and export records for at least four years. 

• Expect delays at borders (particularly early on in the transition period) and communicate with your customers. 

Thank you to Alex for joining us on this episode of 8 Minutes with Activ8. If you’d like to learn more about Simply VAT’s services for e-commerce sellers, visit their website. You can also download their Brexit Bootcamp guide for more information on this topic. If you’re interested in learning more about how Activ8 can help sellers navigate online marketplaces post-Brexit, view our services or contact us directly.