Online shoppers face higher costs on UK purchases from Thursday

Goods with a value of up to €22 were previously VAT-exempt

The new regulations are in part designed to provide clarity to consumers as well as a level playing field for EU companies. Photograph: iStock

Consumers are likely to face higher costs on some ecommerce purchases from non-EU countries under new VAT regulations that come into force on Thursday. Under the system applicable until now, goods with a value of up to €22 were exempted from VAT. From July 1st, VAT will be applicable on all online purchases originating from outside the EU.

The European Commission said studies have shown that the €22 limit exemption has been widely abused by unscrupulous sellers from outside the EU who have mislabelled high ticket items such as smartphones to get around the regulations, undercutting EU competitors. The cost to EU exchequers is “conservatively” estimated to around €7 billion, according to the commission, but no separate breakdown for the Republic was available.

Online shopping has surged during the pandemic, as lockdowns have seen consumers embrace ecommerce, with lower prices in many cases proving attractive. Some consumers face unpleasant surprises, however, when they are landed with the cost of unpaid taxes and other charges at the point of importation, following customs checks.

Maureen Dalton, principal officer in Revenue’s customs division said consumers should be aware that the €22 VAT exemption ends at midnight on Wednesday.


“ This means that goods purchased from a non-EU country that arrive into Ireland for delivery any time after midnight tonight will be subject to VAT, regardless of their value and regardless of when they were purchased. The applicable VAT rate to these goods will be the relevant rate that would apply if the goods were purchased in Ireland.”

The new regulations are in part designed to provide clarity to consumers as well as a level playing field for EU companies. The EU’s VAT system was last updated in 1993, pre-dating the boom in online commerce.

As part of this initiative, the EU is also introducing a new electronic portal businesses can use from this week to comply with their VAT ecommerce obligations on distant sales of imported goods, called the Import One-Stop Shop (IOSS).

The IOSS will facilitate the collection, declaration and payment of VAT for non-EU sellers importing goods to buyers in the EU. The IOSS is designed to provide transparency for buyers, who will only be charged at the point of purchase, thereby avoiding surprise fees when goods arrive. If the seller is not registered in the IOSS, buyers face paying VAT and often a customs clearance fee charged by the transporter.

Sellers registered in the IOSS need to apply VAT when selling goods destined for a buyer in an EU member state. The VAT rate applicable is the one that applies in the state where the goods are delivered to the buyer. If goods are bought within the EU, there is a VAT exemption up to €150.

Rest secure

“Irish consumers can rest secure in the knowledge that the goods they buy are not being fraudulently marked at a lower price just to avoid taxes. The new system will bring a lot more transparency. When you buy from a non-EU company that’s registered in the Import-One Stop Shop VAT should be part of the cost price you pay to the seller upon ordering he product,” said Daniel Sheridan Ferrie, spokesperson for taxation and the custom union.

He said consumers should pay careful attention when buying from non-EU online companies, including the UK, and should check if VAT is included in the final price paid. “The biggest global players – such as Amazon and Ebay – are already signed up to the Import One Stop Shop so you can already be sure that VAT will be part of the price you pay when you order from these platforms.”

The ecommerce association of Ireland welcomed the new VAT rules saying they are “a real opportunity” for Irish businesses.

“Ireland has been flooded with cheap goods from the Far East and beyond, that had been purposely priced below €22 to take full advantage of the VAT exemption”, said Niall Bodkin, managing director of the eCommerce Association of Ireland. “Retailers and suppliers were stifled by their own EU legislators who gave concessions to importers and penalised homegrown businesses. The new rules are fairer for Irish sellers but unfortunately shoppers will see an increase in prices on imported goods from sites like Wish or Alibaba.”