VAT for EU Shipments: All shipments going to member countries within the European Union (EU) are charged a "Value-Added Tax" or "VAT tax." These taxes must be paid by the recipient to receive the goods, or optionally by the shipper or by the marketplace the sale happened on, like Etsy, eBay, or Amazon.
What is VAT and how has it changed in the EU?
Understanding VAT: A Value-Added Tax or “VAT” is a tax that's imposed on sales of goods in foreign countries. While Europeans are used to paying VAT on everything they buy from businesses in their country, the new VAT laws mean they have to pay VAT on anything they buy from other countries, as well.
VAT Applies to Shipments of all Values: Before this rule was enacted in 2021, low-cost shipments going to the EU valued at €22 (22 euros) or lower weren’t subject to these VAT taxes. But now, every shipment sent to the EU is subject to VAT, no matter the value.
You don't *have* to do anything differently as the shipper, unless...
Shippers Aren't Required to Pay VAT: As an American small business, you are not required to pay the VAT tax on behalf of your European customer. But when shipping to an EU member country, you do need to provide:
Customs Forms: A customs form containing full and correct customs data, including a description of each item that's in your shipment and its value.
Harmonization Codes: Your customs form is required to include Harmonization Codes for each item in your shipment, to help non-English speakers identify what's inside the shipment. HS Codes are global identifiers for different types of goods. You can learn more about that here.
IOSS Number for Marketplaces: If you made the sale on a marketplace like eBay, Etsy, or Amazon that collected the VAT tax from your customer and is paying it on their behalf, you will need to include their IOSS or "Import One-Stop Shop" number in your customs form when creating the shipping label, to make sure the customer isn't charged VAT again. Enter it into the International Tax ID field at the bottom of the customs form, as explained here.
When entering the IOSS number in the International Tax ID field, be sure to begin with the letters "IM" and follow with the 10-digit IOSS number. Here's an example of how the proper formatting looks: IM1234567890.
Recipients Must Pay VAT if it Hasn't Been Paid: If the VAT tax has not been paid ahead of time, the recipient must pay the VAT tax before they receive the package from their country’s customs department.
Before the package is delivered, they will be notified and asked to pay the VAT by their country's local package delivery service.
You can pay the VAT tax for your customers if you want to
Choosing to Pay VAT: If you want, you can choose to pay the VAT tax for your European customers for any shipments that are worth less than €150 (150 euros). The EU has created the Import One-Stop Shop (IOSS) to facilitate this.
Registering with the IOSS: Big international marketplaces like eBay, Etsy, or Amazon are required to collect and pay this VAT tax, and will provide you with their IOSS number, which you'll need to include in the customs form when creating your shipping label. If you want to pay VAT for sales you're making outside of marketplaces, you'll need to register for your own IOSS number and manage the VAT payments yourself.
Benefits of VAT Intermediary: Since every EU member country has different VAT tax rates, collecting VAT fees on shipments going to different member countries is a complex task. If you're interested in doing this, it may help to hire a VAT intermediary such as My Duty Collect.
Keep in mind that working with an intermediary can cost quite a bit of money, so this option may only make sense if you’re sending hundreds or thousands of packages to the EU every year.
Why we don't recommend covering VAT
Our Recommendation: In general, we don't recommend taking on the burden of paying VAT on behalf of your customers unless it's absolutely necessary for your business. Since shippers aren't required to pay these taxes, most small businesses prefer to make sure their international customers know that they're responsible for any import taxes or duties that their country may charge them.
How to offset these costs for your recipients
Offset VAT with Cheap Shipping Services: Your European customers may not be thrilled about paying VAT taxes. While these taxes are unavoidable, you can potentially offset them by taking advantage of the cheapest shipping rates possible.
The best way to lock in the cheapest rates is to opt-in for our exclusive discounted international shipping service: Simple Export Rate 🌎
Activating Simple Export Rate: Simple Export Rate is the absolute cheapest way to send lightweight international packages under 4 lbs, and all you need to do is ask for it!
Chat with our Support Crew to activate Simple Export Rate for your account and start saving on your international shipping immediately.
Raise the flag if you need help
If you’re finding yourself a little lost at sea, let us know! We’re happy to lend a hook however we can 😃 Click the blue chat button to get in touch with ARRrrr Support Crew, and we’ll do our best to help you get sailing in the right direction!