Delivered Duties Paid (DDP) and Import One Stop Shop (IOSS)
Delivered Duties Paid (DDP) and Import One Stop Shop (IOSS)
VAT and customs duties changes from 1 July 2021 when sending to the EU
Major changes with regards to EU Value Added Tax (VAT) are coming to e-commerce businesses on 1 July 2021 and it is important that you are fully aware of, and ready to deal with, these changes by that date.
On 1 July the €22 VAT exemption on goods imported to the EU will be removed. This will mean that all goods irrespective of value will be subject to VAT in all EU countries. These changes are being introduced by the European Union in relation to the collection of VAT for goods sold to consumers – and impact both online marketplaces and overseas sellers. The changes will mean that all goods sold and sent directly from the UK to private individuals in the EU are subject to local VAT in the destination country where your customer is a resident.
The changes to the EU’s VAT rules
Until 1 July 2021 consignments with a value not exceeding €22 are relieved from import VAT and customs duty in most EU countries. This is called the Low Value Consignment Relief (‘LVCR’). Some member states have adopted a €10 or an even lower or nil threshold (e.g. in Sweden it's SEK 0). On 1 July 2021 the EU is set to remove the LVCR entirely. The implication of this is that from this date every single UK to EU item, regardless of value, will attract VAT (and customs duty where applicable). The rate of VAT varies by country and will be payable at the rate applicable in the recipient’s country.
The options available
Delivered Duties Unpaid (DDU) service
Delivered Duties Unpaid (DDU), is the standard service for all postal authorities (including Royal Mail), where the overseas post or parcel operator will collect the import VAT (and customs duty, if payable) from the EU buyer prior to delivery, alongside a handing fee. Using these services requires no change for customers but it’s important that you continue to provide customs data for items of non-personal correspondence.
Royal Mail Delivered Duties Paid (DDP) service
As an alternative to DDU, we are developing a postal Delivered Duties Paid (DDP) service. This is due to be operational by July. The service will allow the UK merchant to calculate and collect from their customer at the checkout an additional amount that will cover the cost of import VAT and customs duty alongside the DDP handling fee. This will help to avoid unexpected charges and delivery delays to the end recipient, improving the overall customer experience. We are also at an advanced stage of deployment planning for commercial solutions for DDP too and will be reaching out to existing customers in due course.
The Import One Stop Shop (IOSS)
The Import One Stop Shop (IOSS) is being introduced by the EU, to enable and simplify the declaration and payment of VAT for distance sales of imported goods – with a value up to €150.
The Import One Stop Shop (IOSS) is the electronic portal, your business can use from 1 July 2021 to comply with the new VAT e-commerce obligations on distance sales of imported goods. Once registered for IOSS, VAT can be collected at the checkout and paid directly to EU customs authorities in quarterly, EU, VAT returns. No additional customs handling fees will be applied when the parcels arrive in the EU customs facility, speeding up the release into free circulation of the goods to your customer.
Royal Mail are currently working hard behind the scenes on how you send items with us under the IOSS scheme, should you register yourself, but also to assist you in registering with and operating within the IOSS framework. These solutions will allow goods to be sent to customers in the EU with VAT paid – quickly and simply. Items valued over €150 will need to be sent DDU or as postal DDP. Once these are fully tested and operational, we will provide further details here on the Royal Mail website.
The new rules will transform how you do business in the European Union. You can find more information about these changes here that the European Commission has published.
|Value of imported goods in consignments**||Before 1 July 2021||As of 1 July 2021|
|VAT||Customs duty||VAT||Customs duty|
|≤ EUR 10/22||Exempt from VAT||Exempt from customs duty||VAT due in EU||Exempt from customs duty|
|> EUR 10/22 and ≤ EUR 150||VAT due in EU||Exempt from customs duty||VAT due in EU||Exempt from customs duty|
|> EUR 150||VAT due in EU||Customs duty due in EU||VAT due in EU||Customs duty due in EU|
Source: European Commission Directorate-General Taxation and Customs Union, Sept 2020
(**The threshold is generally €22 across the EU but some member states apply a lower limit)
Delivered Duties Paid rate cardpdf, 74.09 KB
- Full and Complete ITMAT data is required to delivery via DDP
- Items without Full and Complete data will be sent / delivered as DDU
- Important: no food products can be accepted
- Parcel format only
- Tracked & Signed only
- DDP cannot be used to send to PO Boxes and equivalent across recipient countries
- Minimum Spend over £5k per annum
- Our DDP service can only be used with an approved shipping solution
- These platforms capture and generate customs data files plus automatically create the required labels to send items abroad
- Royal Mail has shipping platforms such as †Click & Drop and †Pro Shipping or you can integrate your own system with API Shipping (†Other competitor shipping systems also available)
- Make sure you use product code MTV
- No segregation required
- You can send items of Large Letter and Parcel Format dimensions (see format specifications below). These will all be processed and charged as a single piece Parcel, irrespective of format.
What are the ‘Parcels’ Dimensions?
A Parcel is anything that is not a Large Letter
The length plus the width plus the height must not exceed 900mm and no single dimension may exceed 600mm
For tubular or rolled packages:
The length plus twice the diameter must not exceed 1040mm but must be at least 170mm
The greatest single dimension must not exceed 900mm but must be at least 100mm
No parcel can be heavier than 2kg
What are the ‘Large Letters’ Dimensions?
A Large Letter (formally known as Flats) is considered as anything that is:
Over the size of 140mm x 90mm
Under the size of 381mm x 305mm
No more than 20mm thick
Less than 500g in weight.
Our Tracked & Signed DDP service can only be used when fully compliant customs data is supplied. Businesses will need an Economic Operator Registration and Identification number (EORI) to trade with EU countries (if a business has traded with non-EU countries, it already should have a GB EORI number). To register for an EORI number visit https://www.gov.uk/eori for more information.
With our DDP service, you calculate and charge your customer at the point of sale the cost of import VAT and customs duties (where applicable) payable to the receiving customs authorities when the goods are imported, plus a reduced handling fee. You can either use our landed cost calculator or estimate the value and then charge that to the customer along with the cost of the goods and postage and packing. Once the items have been customs cleared and assessed for tax and duty, instead of collecting these from the recipient, they will be invoiced back to you along with a small administration charge to cover the costs we incur in the overseas destination. This means your customer will not have to pay unexpected charges on receipt of their parcel and ensures that we can expedite customs clearance and minimise transit delays.
You will need to complete a customs declaration form (CN22 or CN23) for items of non-personal correspondence/goods sent abroad which must include the Tax (VAT) and duty value.
The declaration must include a description of the contents and their value. It must also show they are commercial items.
You should also include:
- Commodity codes and country of origin
- Commercial invoice
- Sender’s name and address
Not Ready for DDP?
Royal Mail’s standard international services are Delivered Duty Unpaid (DDU) – whereby your recipient pays any taxes, duties and handling fee.
Please speak to your Account Manager for more information.
- You MUST attach a signed commercial invoice to the outside of the item’s packaging
Destinations to be defined.
PDDP and IOSS are dependent on the overseas delivery Post or partner being ready to accept and process.
We anticipate the charge for PDDP to be £5 but will vary by country.
For further information about sending parcels please see our Parcels User Guidepdf, 2.89 MB.
Returned Items process
If your DDP item cannot be delivered or the recipient returns the item to the seller, it will be returned tracked right back to your local delivery office.
Applying to HMRC for a refund of the UK import VAT (and customs duty, if any) incurred on re-importation will be the responsibility of the Sender and if foreign import VAT / customs duty have been incurred on the items when entering the EU, the seller or the Recipient will have to apply to the foreign customs authorities for a refund of those charges. Royal Mail will not be responsible for these.
- The price for shipping will be charged in accordance with our standard Royal Mail International service
- Any taxes and customs duties (where relevant) plus any handing fee will be collected on a separate summary invoice once customs has been cleared
- All taxes, customs duties and handling fees will be passed on to our customers when Royal Mail are charged them from the overseas post/parcel operator
- Your Royal Mail invoice will show a summary level review of any charges. If you want further detail a line level view can be accessed via our E-Invoicing portal
- Tax is at the rate set in the destination country, eg. 21% in Belgium
- Handling fees will vary by country