Changes in the European Union (EU) legislation on value-added tax (VAT) applicable to e-commerce shipments will take effect on July 1 this year. They stipulate that absolutely all goods that an individual will buy in online stores outside the EU, for example in Chinese, American, British online stores, will be subject to VAT. Buying cheap goods will become more difficult and more expensive.
Until 1 July, the current VAT exemption for imported goods with a value of less than 22 euros is still in force. Gifts with a value not exceeding 45 euros will not be subject to VAT even after July 1.
The new VAT rules apply not only to Latvia, but to all European Union countries.
“VAT will be applied to the entire value of the shipment (including the price of the goods, delivery costs and taxes, if applicable), starting from the first cent according to the VAT rate in force in Latvia, i.e., 21% (or a reduced rate, such as 12% for books)," explains Evita Teice-Mamaja, Chief Public Relations Specialist of the Public Relations Department of the State Revenue Service.
If the goods are subject to excise duty and/or customs duty, the amount calculated in these duties will also be included in the VAT calculation.
Customs duty - as before - will have to be paid if the value of the goods in the consignment exceeds 150 euros. The exemption from customs duty for consignments up to EUR 150 does not apply to alcoholic beverages, perfumes and toilet waters. These goods are subject to customs duty from the first cent.
The amount of both VAT, customs duty (if applicable), and excise duty on excisable goods will be calculated in the system at the moment when the simplified customs declaration for the specific goods is made. For example: a person buys a product worth 15 euros in an online store outside the EU, its delivery costs are 2 euros. The consignment will contain goods subject to a standard VAT rate of 21%. The value of the goods and delivery costs will be taken into account when calculating VAT. Consequently, the recipient will have to pay VAT: 21% of EUR 17.00 (15+2) = EUR 3.57.
As a result, the receiver will have to lodge a customs declaration electronically and pay VAT on any goods imported from outside the EU.
The SRS explains that in cases where a third country online store has registered in the EU IOSS (Import One-Stop Shop) mode, it will collect VAT from the buyer at the time of purchase. The seller registered with IOSS will have to indicate separately the amount of VAT to be paid by the buyer at the time of purchase. When a shipment sent by an IOSS registered trader is delivered to Latvia, the customs formalities will be completed by Latvijas Pasts or the express mail carrier. The receiver will not have to clear the customs of such a consignment himself.
If the third country seller has not registered with the IOSS, customs formalities will have to be completed and VAT will have to be paid in the country of destination - Latvia, where the goods will be released for free circulation. And the receiver will have to do it. A person will be able to choose the most convenient way of customs clearance of goods, one of which is by doing it himself - connecting to the SRS Electronic Declaration System (EDS), filling in and submitting the simplified Import customs declaration for postal items (customs declaration). In this case, the person will be able to make a VAT payment online in the system. The other way is to use paid services offered by Latvijas Pasts, express mail customs brokers or other customs clearance specialists to do the customs formalities. If the person has entrusted the customs clearance service provider with customs clearance, the calculated tax and fee for the customs clearance service will have to be paid in the manner and place specified by the relevant service provider.
Thinking about customer convenience, the SRS has already provided every individual who receives items from third countries with the opportunity to declare goods electronically by filling in the simplified import customs declaration for postal items in the SRS Electronic Declaration System. This can be done in Latvian, English or Russian. More information: https://www.vid.gov.lv/en/receipt-consignments.
This simplified declaration will be adapted to the changes that will take effect on July 1 this year, so that each person will be able to complete the simplified import customs declaration for postal items. However, of course, it will still be possible to entrust the customs clearance of the shipment for a fee to, for example, Latvijas Pasts, express mail customs brokers, etc.
The new rules will apply to commercial consignments of goods from third countries. They will not apply to non-commercial items or gifts - items sent by a natural person from a third country to another natural person in the EU free of charge, on an occasional basis and with goods only for the personal use of the recipient and his family members.
For non-commercial items or items sent by a natural person to another natural person as a gift, the current tax exemption will be maintained after 1 July. Goods sent as a gift will not be subject to tax if the value of the shipment does not exceed 45 euros. However, such consignments will also have to be declared to customs by lodging the declaration, regardless of the value of the goods in the consignment.
To be able to apply a tax exemption to a non-commercial consignment, the quantitative restrictions specified in regulatory enactments for certain goods - alcoholic beverages, tobacco products, perfumes and toilet waters - must be observed (more information in the section “Quantitative restrictions in a non-commercial consignment”).
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