Selling to EU Customers? Here’s How to Navigate VAT and Customs
Navigating EU VAT and customs for your online retail business can be complex. Learn about shipping options (DDU, DDP, IOSS) and how to simplify EU expansion with Reach.
Expanding your online retail business into the European Union (EU) market can open doors to new opportunities. However, navigating VAT and customs requirements when shipping internationally can be challenging.
Let’s explore the three main shipping options available to non-EU retailers selling physical products to EU customers:
Option 1: Shipping DDU (Delivered Duties Unpaid)
Shipping DDU means your customers become responsible for paying customs duties and VAT upon delivery. While it might seem simpler for retailers, it comes with several drawbacks:
- Negative Customer Experiences: Customers receive unexpected charges upon delivery, potentially leading to dissatisfaction.
- Higher Return Rates: Refusals to accept packages due to additional costs increase returns and shipping expenses.
- Delays at Customs: Shipments can be held at customs, resulting in delivery delays and negative reviews.
Option 2: Shipping DDP (Delivered Duties Paid)
DDP means the retailer collects customs duties and VAT from customers upfront, providing a clearer customer experience. However, retailers still encounter challenges, including:
- Higher Shipping Fees: Shipping providers typically charge higher fees for handling DDP shipments due to the additional administrative tasks involved.
- Complex Pricing Models: Predicting precise duties, taxes, and associated shipping fees upfront can be challenging, complicating pricing strategies.
- Administrative Burden: Each shipment involves detailed paperwork and compliance tasks, increasing operational complexity.
Option 3: Using the Import One Stop Shop (IOSS)
The EU introduced the Import One Stop Shop (IOSS) in July 2021 to streamline VAT collection for low-value goods (under €150). Under IOSS, retailers collect and remit VAT at the point of sale, simplifying the process for customers and reducing customs delays.
Benefits of using IOSS:
- Transparent Pricing: Customers see the full cost upfront, enhancing satisfaction.
- Faster Customs Clearance: Reduced risk of shipment delays and additional charges upon delivery.
However, setting up IOSS for non-EU retailers can be challenging:
- Registration and Intermediary Requirement: Non-EU retailers must appoint an EU-based intermediary for registration and VAT management.
- Monthly VAT Reporting: Detailed monthly VAT filings are required, along with currency conversion management and adherence to varying VAT rates across the EU.
- Complex Record-Keeping: Retailers must meticulously track and report every sale, creating additional workload for accounting teams.
Simplify EU Sales with Reach
Reach, acting as your Merchant of Record, removes these complexities by managing VAT collection, customs compliance, and customer interactions.
Key advantages include:
- Comprehensive VAT Management: Reach handles VAT registration, collection, filings, and reporting.
- Seamless Customer Experience: Transparent pricing and hassle-free deliveries build customer trust.
- Cost-Effective Integration: No complex technical integrations required; you can retain your current setup and leave the complexities to us.
Simplify your EU expansion with Reach—let us handle VAT complexities so you can focus on growing your business.