News PT

Changes in the VAT regime for Online Intracommunity Transactions

13 July, 2021

A new EU directive came into force on 1st of July, amending the VAT regime for Intra-Community Transactions related to online commerce. Although scheduled to take effect from 1 January this year, the new directive was postponed due to the pandemic so that member states had sufficient time to carry out the respective adaptations of the computer systems.

This change, provided for in law nº 49/2020, of 24 August, imposes the payment of VAT at the rate of 23% for all online purchases made in extra-community stores. Thus, there is no longer any VAT exemption for products up to 22 euros purchased in online commerce outside the European Union, as for instance when coming from China. In other words, buying outside Europe will be more expensive for the consumer.

In this sense, the IOSS portal (Import One Stop Shop) was created where e-commerce can register and ensure the entire VAT payment process in accordance with European standards. By finding this designation on the website of your purchase, you are guaranteed that you will not be charged additional costs related to VAT since payment is made at the time of purchase and the VAT settlement is ensured between the seller and the Tax Authority. In these cases, a commercial invoice is generated that allows carriers to clear the product and deliver it to the customer without any constraints.

When making purchases in an online store that is not registered with IOSS, you will have to pay the tax when the product enters the national territory. If you have entered your phone number when purchasing, you will receive a message to start the customs clearance process as soon as the purchased product leaves the country of origin. If you have not provided your telephone number when the product arrives at customs, you will be sent a letter to start the customs clearance process.

The VAT rate payable is that which belongs to the member state of destination of the product. In the case of Portugal, the rate is 23%. The law covers all countries of the European Union, however some territories that are within the community space are considered extra-community for tax purposes, namely Germany (Buesingen); Spain (Canary Islands, Territories of Ceuta and Melilla, Andorra); France (Martinique, French Guiana, Réunion Island and Guadeloupe); Greece (Mount Athos); Italy (San Marino and Vatican); Jersey, Guernsey, Gibraltar and Isle of Man.

In the case of the United Kingdom, it is important to remember that, with Brexit, it became considered an extra-community country and, therefore, online purchases and shipments made from this destination are also subject to the payment of VAT and other applicable customs fees.

In this context, it is important not to confuse customs duties with customhouse charges. The first refers to the payment of a product analysis and classification service by customs. The second concerns the import tax on extra-EU products. This is established by the EU annually and varies by product category. To find out the classification of your order and the corresponding rate, see the Service Schedule on the Finances Portal. Regarding customhouse charges, the exemption for purchases of less than 150 euros is maintained, except for classes of products such as tobacco and alcohol.

The new directive now in force aims to reduce the inequalities that e-commerce has created between companies operating outside and within the EU. It is estimated that in 2018 the VAT that was not collected in the community space was around 140 million euros and that a good part of this potential loss in revenue originated in online purchases in other countries.

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