The European Union scrapped value-added tax (VAT) thresholds yesterday, affecting e-commerce sales to the bloc.

Previously, goods valued below $26 were tax-exempt. Under the reforms, online retailers are required to register with an intermediary in a member state and include identification numbers on packages before they are shipped to customers.

Under the new changes, non-European businesses shipping goods valued more than approximately $175 will also be required to register under an Import One-Stop Shop (IOSS) scheme aimed at simplifying declarations and VAT payments.

“We hope that the administrative benefits of the IOSS, in the long run, outweigh the impact of the loss of the VAT exemption and the flexibility now asked from companies,” said Tassilo Brinzer, president of the European Chamber of Commerce in Cambodia. “The fact that merchants can file a single VAT return for the whole of the EU and make just one tax payment is also a great benefit. The lifting of the VAT exemption for the import of low-value commercial goods into the EU markets makes doing B2C [business to consumer] business with Europe more expensive.”

Shopify, a Canadian e-commerce firm that allows users to build personal online marketplaces, told Khmer Times the firm had seen a “handful” of inquiries regarding the new IOSS. Chief among them was the requirement for non-European companies to have a tax representative living in a member country.

“We’re going to update tax settings and charge the VAT rate for the EU automatically,” a representative for the company said.

Shopify currently holds the distinction of being the most valuable company traded on the Toronto Stock Exchange. It allows everyday users to make online marketplaces.

Earlier this year, the Ministry of Commerce used its services to sell food to individuals living in Covid “Red Zones”.

“We anticipated the changes… and tried to make the transition for customers as seamless as possible, so the changes just require the user to register through the [IOSS] and then enter their VAT number before it’s automatically charged, moving forward,” Shopify said.

More information on the IOSS and new VAT laws can be found in Shopify’s frequently asked questions section.

The representative stressed the new rules would make online selling easier because Shopify would bear the burden of collecting and reporting taxes.

Brinzer said EuroCham is ready to help its network find solutions to help procure a tax agent in the European Union.

“For the time being, businesses can continue with multiple VAT filings as before, should they struggle to find a right intermediary,” he said.

• Tags: European Union, tax, VAT