International e-commerce becomes easier with simplified VAT payment within the EU

On July 1st, 2021, the international VAT payment on business to consumer sales can be paid in your home country. The current local thresholds of export of goods via distance sales (e-commerce) will be replaced with an EU wide threshold of 10.000 EUR.

Currently, different member states have different thresholds for export (which vary from 25.000-100.000 EUR) and you need to report and pay VAT in each country you export to. These thresholds will be replaced with a combined threshold of 10.000 EUR for your total business to consumer export.

This will be accompanied by a new system for reporting VAT, which will simplify both VAT registration, reporting and payment. This system is called OSS (One Stop Shop) and is already active for companies selling digital services.

Main changes from July 1st, 2021:

• An EU export threshold of 10.000 EUR in total will be implemented

• After crossing the 10.000 EUR limit, all sales outside your home market must include the charge of the local VAT rate in the country

• A new system, OSS, will be available to pay the VAT in your home country and the local EU VAT authorities will settle the payment with their counterpart in the customers home country

How to pay VAT locally from July 1st, 2021:

• Either via OSS or via traditional VAT registrations/reporting, if you go with OSS it will change the VAT reporting in your home market as well

• Each EU country will have its own website where you should register, in Denmark you will find it here

• You can choose to continue to do as you do today, with individual registration, reporting and payment in each country

Prepare your shop and company for the new VAT rules

• Keep an eye on your total export to other member states, the new total limit is 10.000 EUR

• Decide on whether you will use OSS or traditional VAT registrations/reporting

• Align your systems and bookkeeping processes with your decisions

See examples scenarios below:

What does Brexit mean to online sales from EU to UK?

Brexit negotiations have been going on for years, which finally at 1. January 2021 were effectuated. However, planning for what Brexit would mean to trade between UK and other countries, has been almost impossible.

In this short post we have highlighted some of the Brexit consequences for selling online from the EU to UK:

• On the positive side, trade between EU countries and UK, will not be restricted by quotas or taxes as long as the traded goods are manufactured in EU.

• The reality is though, that a lot of goods are manufactured outside of EU and therefore taxes will be applied when shipped to UK.

• Taxes vary on different product groups, and even if only some of the product value is manufactured outside of EU, this will be calculated and taxed accordingly.

• UK's previous rule of VAT free imports on products below 15GBP is also removed, so VAT (currently 20%) is paid on all sales. VAT registration in UK is now also required.

Credit card fees to quadruple?

Mastercard recently announced that they will increase the fees by at least 400% from 0.3% on credit card payments and 0.2% on debit card payments to 1.5% and 1.15% respectively on payments from the European Economic Area (EEA is all EU countries + Iceland, Liechtenstein and Norway) to the UK. Why? Well, because they can: Since 2015, the EU has capped these fees across the EEA countries, including within the UK. But now, card issuers apparently can set the price themselves, and that could turn out to be very expensive for the selling party.

[UPDATE 4th February] Customer experience The first impressions from January 2021 shows that customers in UK buying from EU based stores had a rough start. Brexit has caused absolute chaos with serious delays, problems with paperwork and goods being returned to sender at the border. Due to this, one of our clients had delays of up to 3 weeks from the order being placed to being delivered.

As a result this client saw a +260% increase in customer service contacts (from 0,4 contacts per order to 1,44), as customers were asking for their order's status and for refunds. This is a terrible customer experience, and very expensive for the seller to handle.

Should I start selling in UK now?

Historically, UK has been one of the toughest e-commerce markets to enter in many years. Although the demand-side is very strong, UK has always been one of the first markets to enter for brands and webshops from around the world. With the extra hassle and costs involved in doing business with UK currently, it would be worth considering other large European markets inside EU as an alternative, unless there's a special opportunity or gap in the UK market for your product. Hopefully over time better trade agreements will be gradually introduced between EU and UK. Consider a Market Scan to find the best fitting market for your shop/product.

Sources: ehandel.se, dhandel.se & theguardian.com

Here is why local experience is important to succeed abroad!

Whether you are doing marketing in Denmark, Sweden or Germany, Google Ads and Facebook algorithms are the same. But why shouldn’t a marketing specialist such as me be able to run campaigns in all three countries? I am a native Dane; I can read Swedish and I studied German in high school.

The answer is quite simple, culture. Even though Denmark borders both Sweden and Germany, the three countries have significant cultural differences when it comes to online shopping. So, what should you consider when launching your business in a new country?

One thing is language. It is important not just to have category texts and descriptions in the native languages, it is also important to have product texts translated in order to both help the customer but also to support the feeds needed to conduct online marketing campaigns. If a potential customer in Germany is searching for a “lederjacke” and your product text is in English and the product is called “leather jacket” your product will not be eligible to be listed on Google Shopping.

Therefore, by having well-written category and product texts, your Google Ads click prices will in turn be lower and your ad budget will be able to generate more traffic. An increase in traffic from Google Ads will help feed your Facebook Pixel, thereby making it possible to create better audiences for your paid Facebook campaigns. Accordingly, better audiences for your Facebook campaigns combined with Google Ads campaigns that are able to showcase your products locally will result in higher revenue, seen as you are able to find the right customers through both push and pull media. This is perfectly displayed through the week on week revenue from one of our clients, where customer service, marketing efforts and algorithms go hand in hand and ensure the success of our client abroad.

Graph displaying the week on week increase in users combined with revenue. Highest revenue being 57.000 SEK weekly and highest number of users being 5.050

But what should you as a webshop owner do? How do you make sure that you take both the online shopping culture into consideration as well as having product descriptions that are not just translated but also optimized for search engines?

In my position as a Marketing Specialist at MakesYouLocal, I work closely with our native E-commerce specialists. We cover 10 different languages here in Copenhagen as well as 16 across Europe, all native speakers. I am therefore able to get feedback and inputs on marketing campaigns targeting a specific country or region, as well as getting insights on questions and concerns from customer service calls, emails and our monthly customer service reports.

By collaborating and sharing knowledge about our end customer's issues, desires and needs, as a marketer am able to create campaigns focusing on exactly what the customers need and our native E-Commerce specialists are able to get both paid and organic search data. Data they in turn can apply when writing well-written product and category texts, thereby optimizing for search engines.

Read more about our marketing approach and how we can help you succeed abroad here.