Introduction

Last week I noticed a lot of threads going around about the "VAT e-commerce rules" directive changes that was set to change on July 1st (as many of you refer it by) by the European Union (EU). For starters, these changes have been updating over the years many times and this specific change was actually due on January 1st, 2021 but was set back 6 months due to Covid-19 related concerns and issues.

Over the course of this first week into July, I have seen a lot of assumptions, questions and statements being made (that are either true, partially true or just straight up false) on these changes. I thought I'd give my insight and information about it. I took some time before and after the changes to understand what EU exactly was changing.

Anything I refer to in this thread will be information taken from my local postal/customs (mail conversation/website) or from this specific 99 page .pdf called "Explanatory Notes on VAT e-commerce rules" - Published September 2020 by the Commission's Directorate-General for Taxation and Customs Union.

Let's get started...! There will be a summary down below, if someone is just looking for quick answers. Details will be explained in each section including:

• What is "July 1st"?
• Can I avoid the VAT (Value added tax)?
• Triangle Shipping, does it work?
• The IOSS
• Will the chances of being seized increase (or maybe even decrease)?
• Summary
• [EDIT]

A small disclaimer: All of this is being explained by my views and take from the documents/information provided by credible sources. All of it might not be applicable to your country, but im fairly certain that most EU countries handles these customs procedures the same.

What is "July 1st"?

For those that have been living under a rock or are rather new to this, July 1st was the set date where EU added new and changed some of the old laws regarding import of goods from third-countries (non-EU countries).

Many of you have heard about the 24$ or less limit, but that's gone. The 24$ limit was a limit where if you package did not exceed that amount, it wouldn't be subject to import VAT. It would go straight through customs tax-department.

The "24$ rule" change is what's being spoken about most. But there is more to it. Some bits and pieces that affects other related things, to taxation specifically. To my understanding and realisation what you love and refer to as "Triangle Shipping" will not work.

EU has also introduced third-country businesses to the IOSS model, a system that had been used for years now by businesses inside EU. Before July 1st, businesses operating outside of EU could not partake in the IOSS model.

Anything mentioned above in the introduction will be explained more detailed down below.

Can I avoid the VAT (Value added tax)?

The simplest answer you're looking for is, no. There were two reasons why you didn't have to pay VAT before and that was either 24$ rule or through triangle shipping. The 24$ rule speaks for itself, every penny from your package will be taxed, it's as simple as that. But what about triangle shipping?

According to EU themselves, in their Explanatory Notes they addressed an issue:

3rd countries = Non-EU countries

EU is not stupid, they know that their system is being abused. They also addressed this issue:

EUR 22 limit = USD 24 limit

Which leads me to think that they know very well, how all of you have been avoiding tax these years through declarations under 24$ or triangle shipping things. But that's what's being changed.

I recently stated in another thread that Triangle Shipping wouldn't work inside EU anymore, but according to another redditor I was wrong because CSSBUY had told him that it still works. Now I don't believe that CSSBUY (or any other agent that has stated this) means any harm. I'm pretty sure they want what's best for you, as you are their customer. But when it comes to a business settled in China, you shouldn't trust them too much relating concerns and issues related to EU laws etc.

Triangle Shipping, does it work?

Some of you have probably ordered something and used triangle shipping willingly and some of you have probably been given the special treatment from your seller/agent to have your parcel/package sent through a "triangle shipment".

There are 3 involved parties, the "underlying supplier", the "deemed supplier" and the " EU customer". To address this specific issue EU has implemented an article to their VAT Directive called "Article 14a". It's a legal provision that EU can use to make a taxable person liable for VAT on their sales (or not). To make things clear, when you buy a product it's not you as a citizen that is being taxed. It's the business that is being taxed on their sale, but the business will force you as a customer to pay the VAT on their sales. In-direct you're being taxed for buying something, but legally speaking it's the business being taxed.

B2B = Business to business, B2C = Business to customer

Above is a picture of an ongoing purchase through an EI (Electronic Interface) that could be refered to any purchase made online through the internet. The customer will order something from a business through an EI. The customer will then receive their final product from the underlying supplier, that happened to be placed in the EU.

When customs receive packages from businesses placed inside EU, they will not look into the matter of taxation. There will of course still be security procedures to undergo since all countries don't operate under the same laws. In some EU countries weed is legal, in some it's not (as an example). But EU is certain that any purchase made from a business inside EU could not have avoided taxes, since every country has their own "EU provision" making sure that businesses pay their obligated tax.

But the idea of a triangle shipment is that your seller/agent will ship to a country with easier access to pass through customs. To my understanding Germany has been a popular country to have your package come from. Why a country is choosen is a good question, I'm not from Germany or any of the "popular triangle shipping" countries, so I don't know the full story to it.

The reason not all businesses, sellers or agents can offer this triangle shipping is because you need to have some sort of storage facility that can forward the package for you. That is also why triangle shipping is "more expensive" because you are paying the "forwarder" their money for their service.

Reading the text beneath the above model, EU states that the customer ordered from an EI and has their product sent through the underlying supplier (that is often located inside EU). Since the product is being sent from the underlying supplier they are the ones supposed to be treated for VAT purposes (and they're inside EU, so it's VAT-free), atleast that's what it used to be. Now EU is making sure that the EI (your agent/seller) pays taxes to the underlying supplier for "purchasing their goods from the underlying supplier and selling them onward to the customer". This means that your agent/seller needs to pay their obligated tax, which is something you as a customer will end up paying in the long run, making triangle shipping useless (and probably more expensive).

This is just a brief look at the matter, there are more explanatory notes on this specific matter in their 99 page .pdf. To not make this thread too long, I will leave it at this. I'm not certain if triangle shipping will work, but from a theoretical perspective when reading the notes it seems not to. It could be different in practice, the only way to know is if someone from EU tries it out from themselves and report it on this reddit or elsewhere. Personally, I would not try it as of now (unless you're ready to lose money).

The IOSS

The IOSS system has been around for years, many, if not every business inside EU has it implemented already. If you've purchased from a business that operates inside EU, you have most likely seen the VAT during checkout. The VAT you have seen, is what the business owes your respective countries customs for each sale.

It's a contract between the businesses and EU, where the business offers to collect the tax upon purchase and forward it to the respective governments tax department. When the package ends up in customs, they will look into their IOSS system and either give it a green light (VAT payed) or red light (VAT not payed). If it's green, it's instantly forwarded to you without any tedious long processes. If it's a red light, they will reach out to you (and maybe ask for invoice/receipt) and make you pay the VAT, it's a much longer process that can take up to 2 weeks (or maybe even more now during the apocalypse of July 1st).

It's an automated system that is supposed to speed up custom clearance, especially since EU wants to tax EVERY package that comes in (now when 24$ rule is gone). But the IOSS system does not deal with seizements. It's not a system meant to find any contraband. Whether that be illegal drugs, guns or copyrighted material (replicas). There are safety protocols to follow whenever your package is received by customs, to make sure your package is of no harm.

Before your package is being checked into the IOSS system (or even taxed at all), it will be scanned and MAYBE randomly checked into (just like they've always done). Whatever the safety protocols are for each respective customs, they will be the same after July 1st, as they were before July 1st. Even those safety protocols are being dealt by automated systems (like scanning), but also by random checkups since customs needs to make sure that their machines are doing their work. These random checkups are most likely the reason why you'd get seized. But yet again, it has nothing to do with the IOSS system.

If the IOSS system has not given you the green light, your package will be stored somewhere inside your countries customs. They will not open the package, as it is your right to privacy. Instead they will either ask for an invoice/receipt (since they are NOT allowed to open and look for themselves) then make you pay VAT on the declared value (plus handling fees). Or they will just reach out to you and make you pay VAT (since some packages have the invoice on them) plus handling fee. If you fail to give them any paper work (invoice/receipt) and/or refuse to pay the VAT, they will simply send the parcel/package back to the seller. They will still not open it, as it is your protected right to privacy.

Some of you might think that the invoice would spoil what's inside the package and have it seized, but that's not true. Your invoice does not need to contain any label or brand names, it can simply say "Shoes". Customs only need to know what they're taxing (since some things have different VAT percentage), but if you buy a shoe from Nike or Adidas does not matter. They will still have the same VAT percentage, no matter brand/label. Once again you have your rights to privacy, but you are obligated to tell them what type of items you've bought, since you are obligated to pay tax (and to be taxed rightfully and lawfully, customs needs some information to work with).

As of 2018, Swedish customs has never let any package inside from a 3rd country without paying VAT. This means that I have payed VAT on all my packages, but that has been no-problemo. The only issue of not having the IOSS system (and having to do the VAT/paperwork myself) is that it takes up to 1-2 weeks more for me to receive my items. I have not had any other issues other than that and that's my personal take.

As I do have a package coming in soon (hopefully) I asked my postal/customs if there will be any changes to what I used to do (from the above text). They reached out and told me that there would be no different now, as of before. They only stated that all imports will be handled by customs if the business doesn't have a "contract" with them (which I believe is refered to the IOSS). Other than that our postal/customs has stated that there will most likely be delays now in the beggining of this new change, as there will be an overflow of packages coming in to be dealt by customs.

Will the chances of being seized increase (or maybe even decrease)?

This is the most talked about issue that many seem to have. Will I be seized? Will customs take a peak inside my package? The simplest answer I can give you is; no, you will not have an increased chance of being seized. What's being changed is the laws of taxation, not your rights to privacy or anything else.

The IOSS is an addition to the tax department, since all packages will end up in customs. To speed things up you need an automated system, which is why the IOSS was introduced in the first place and now being introduced to 3rd countries. The reason why EU had the 24$ rule was not to be nice to their citizens, but because they had no way of dealing with so many packages coming into the respective countries. The processes would either be too slow or too costly for them to run a business on. But their hopes is that the IOSS will make things go just as fast as before, if not faster (if VAT is payed through the IOSS).

The IOSS system also helps keep track of all the VAT that's supposed to be payed. This means that IOSS helps you as a customer to speed custom clearance up, but also helps EU get their tax money (that was dodged before through triangle/24$).

Most of you won't have the IOSS payment done through your seller/agent, but rest assured that your chances of being seized will not increase. If you handle your invoices/receipt accordingly they won't care. But same "rules" apply as usual, if you send in a parcel of 20kg declared at 24$, then you're probably screw anyways (with or without the changes as of July 1st).

What's bad about the IOSS is that you can pay the VAT through IOSS (when that becomes available) and still have your items seized, which is due to a safety protocol (and not related to taxation). This means that you payed more money (than before) and essentially lost that money (unless you riddle yourself out of the situation).

Summary

With all these changes I would advice you to prepare your wallets and find your inner peace and harmorny, since you will have to wait extra longer to recevie your packages. My best advice is to pay your taxes. Don't try to avoid them as you will only shoot yourself in the foot.

If you are unsure how to deal with paperwork including receipts/invoices, there are multiple threads about it here on this subreddit. I personally ask my agent to give me an invoice, so I don't have to stress about it.

At the end of the day, EU just wants more tax money and they don't care about your replicas reaching you. EU is trying their best to make competition between businesses operating inside EU as fair as they are from businesses operating outside EU, which is only a tax related concern. They don't want their EU businesses to be outcompeted by non-EU businesses as that would make thing problematic in itself. But that's a whole other story for a whole other day.

Just to make things clear, I do not work for EU or have any correlation with them. I'm just an average human that find the spreading of misinformation and fearmongering obnoxious and wrong. I hope this thread covered up most of things. I'm no expert in this and if I'm wrong on certain subjects, just let me know (but please leave a credible source as I won't take your words as fact elsewise) and I will correct it. I might update the thread as more information comes in. If I notice anything is poorly explained I will edit it too. Thanks for reading and a blessing to all your packages heading through customs.

[EDIT]

Thanks for the kind words and awards, strangers. From what I can collect from this thread, UK is not affected by these changes. When it comes to triangle shipping it seems like people are still managing to get packages through, but I'm not certain to why and if it'll be a permanent thing. It also seems like agents like CCSBuy have set up their IOSS and it's already in work, which is great. Also, no one has mentioned any seizing, which is great! All hail our beloved taxes and welfare.

My own package just arrived to customs and I immediately sent them my paperwork. To my surprise they answered within 3 minutes and just like that my package had it's VAT payed. It is one of my fastest custom clearances ever till this date. Maybe this change isn't that bad after all...?