Low-value consignment relief

Last updated

When goods are imported into a European Union country from a non-EU territory, those goods may be subject to customs duty, excise duty and value-added tax.

Value-added tax is an EU tax adopted by the member states of the European Union. However, an optional exception is allowed on low value shipments to member states in the form of an EU administrative VAT relief, known as Low Value Consignment Relief or LVCR. It is governed by the EU Council Directive 2009/132/EC. [1] [2] [3]

LVCR is an optional form of VAT relief designed to speed up the transit of low value goods through the mail which might otherwise be delayed by customs and also to reduce the cost of tax collection where it might not be practicable.[ citation needed ] Member states, if they decide to allow this relief, can set it at a maximum limit of between €10 and €22, but must ensure that it is applied in a way that does not cause competitive distortion or allow VAT abuse. After the Brexit transition period, the UK withdrew LVCR meaning that all imports to the UK have attracted VAT regardless of their value since 1 January 2021. [4] The European Union is expected to implement similar changes from 1 July 2021. [5]

An example of the use of LVCR was found in the LVCR allowed by the UK on shipments originating from the Channel Islands. While this was in place the rate of UK domestic VAT went unchanged and this allowed internet order fulfillment centres to appear in the Channel Islands for packages under £18 (€22). In 2011 the UK Treasury announced that from 1 April 2012, LVCR would no longer apply to goods imported to the UK from the Channel Islands. [6] It was announced on 4 October 2012 that Condor Logistics would close its operations with the loss of about 180 jobs (110 in the UK, 50 in Jersey and 20 in Guernsey). The closure was blamed on changes to LVCR affecting the Channel Islands. [7] In August 2013, Huelin-Renouf, which had operated a lift-on/lift-off container service for 80 years between the Port of Southampton and the Port of Jersey, ceased trading, [8] although the business was later taken up by a market entrant, Channel Island Lines.

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Jersey</span>

The economy of Jersey is a highly developed social market economy. It is largely driven by international financial services and legal services, which accounted for 39.5% of total GVA in 2019, a 4% increase on 2018. Jersey is considered to be an offshore financial centre. Jersey has the preconditions to be a microstate, but it is a self-governing Crown dependency of the UK. It is considered to be a corporate tax haven by many organisations.

<span class="mw-page-title-main">Customs</span> Government agency which regulates the flow of goods and collects duties

Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs has been considered as the fiscal subject that charges customs duties and other taxes on import and export. In recent decades, the views on the functions of customs have considerably expanded and now covers three basic issues: taxation, security, and trade facilitation.

An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer.

Rip-off Britain is an expression used by some to refer to the phenomenon in which some products and services cost significantly more in the United Kingdom than in other countries, especially member states of the European Union and the United States, than a basic currency conversion would permit.

An ad valorem tax is a tax whose amount is based on the value of a transaction or of a property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax (VAT). An ad valorem tax may also be imposed annually, as in the case of a real or personal property tax, or in connection with another significant event. In some countries, a stamp duty is imposed as an ad valorem tax.

<span class="mw-page-title-main">Duty-free shop</span> Type of retail outlet

A duty-free shop is a retail outlet whose goods are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country, who will then pay duties and taxes in their destination country. Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refunding the duty component.

<span class="mw-page-title-main">European single market</span> Single market of the European Union and participating non-EU countries

The European single market, internal market or common market is a single market comprising the 27 member states of the European Union (EU) as well as – with certain exceptions – Iceland, Liechtenstein, and Norway through the Agreement on the European Economic Area, and Switzerland through sectoral treaties. The single market seeks to guarantee the free movement of goods, capital, services, and people, known collectively as the "four freedoms". This is achieved through common rules and standards that all the EU member states are legally committed to following.

<span class="mw-page-title-main">Budget of the European Union</span> Monetary budget of the EU

The budget of the European Union is used to finance EU funding programmes and other expenditure at the European level.

VAT-free imports from the Channel Islands to the United Kingdom took place for a few years during the early 21st century as a result of low-value consignment relief (LVCR). This is a tax relief that applies to low-valued imports to the European Union, exempting them from value-added tax (VAT). Although the UK was a part of the EU from 1973 until Brexit in 2020, the Channel Islands were not and unlike the UK they did not charge VAT on purchases. The UK government applied LVCR to imports from the Channel Islands, resulting in the construction of distribution centres on the islands and the export of many low-valued goods from there to the UK. The practice was unilaterally brought to an end in April 2012 by HM Treasury, the finance department of the UK government.

Intrastat is the system for collecting information and producing statistics on the trade in goods between countries of the European Union (EU). It began operation on 1 January 1993, when it replaced customs declarations as the source of trade statistics within the EU. The requirements of Intrastat are similar in all member states of the EU, although there are important exceptions.

A value-added tax identification number or VAT identification number (VATIN) is an identifier used in many countries, including the countries of the European Union, for value-added tax purposes. In the EU, a VAT identification number can be verified online at the EU's official VIES website. It confirms that the number is currently allocated and can provide the name or other identifying details of the entity to whom the identifier has been allocated. However, many national governments will not give out VAT identification numbers due to data protection laws.

<span class="mw-page-title-main">Isle of Man Treasury</span>

The Treasury of the Isle of Man is the finance department of the Isle of Man Government. It prepares the annual budget for the Government, and also handles taxation, customs and excise, economic affairs, information systems, internal audit, currency and the census in the Isle of Man.

<span class="mw-page-title-main">European Union Customs Union</span> EUs common customs area

The European Union Customs Union (EUCU), formally known as the Community Customs Union, is a customs union which consists of all the member states of the European Union (EU), Monaco, and the British Overseas Territory of Akrotiri and Dhekelia. Some detached territories of EU states do not participate in the customs union, usually as a result of their geographic separation. In addition to the EUCU, the EU is in customs unions with Andorra, San Marino and Turkey, through separate bilateral agreements.

<span class="mw-page-title-main">European Union value added tax</span> EU-wide goods and services tax policy

The European Union value-added tax is a value added tax on goods and services within the European Union (EU). The EU's institutions do not collect the tax, but EU member states are each required to adopt in national legislation a value added tax that complies with the EU VAT code. Different rates of VAT apply in different EU member states, ranging from 17% in Luxembourg to 27% in Hungary. The total VAT collected by member states is used as part of the calculation to determine what each state contributes to the EU's budget.

<span class="mw-page-title-main">Council Implementing Regulation (EU) No. 282/2011</span>

Council Implementing Regulation (EU) No. 282/2011 was adopted by the Council of the European Union on 15 March 2011. This was mainly because the terms and wording of Directive 2006/112/EC have been inconclusive in some cases. The Regulation provided new implementing measures for the VAT Directive. Especially due to the amendment of the VAT Directive itself and the consistent case-law of the European Court of Justice, the former Implementing Regulation (EC) No. 1777/2005 had to be recast and clarified in certain aspects. This Implementing Regulation became effective on 1 July 2011 and does not have to be transported into national legislation of the individual member states of the European Union and thus is directly applicable.

<span class="mw-page-title-main">Value-added tax in the United Kingdom</span>

In the United Kingdom, the value added tax (VAT) was introduced in 1973, replacing Purchase Tax, and is the third-largest source of government revenue, after income tax and National Insurance. It is administered and collected by HM Revenue and Customs, primarily through the Value Added Tax Act 1994.

<span class="mw-page-title-main">Value-added tax</span> Form of consumption tax

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax. VAT is an indirect tax because the person who ultimately bears the burden of the tax is not necessarily the same person as the one who pays the tax to the tax authorities.

The European e-commerce VAT directive is a directive in the European Union which regulates value added tax of sales to consumers in EU and EEA countries.

<span class="mw-page-title-main">Import One-Stop Shop</span> Electronic portal in the European Union

Import One-Stop Shop (IOSS) is an electronic portal in the European Union which serves as a point of contact for the import of goods from third countries into the European Union. The scheme aims to simplify the declaration and payment of value-added tax when importing goods into the European Union (EU).

<span class="mw-page-title-main">Taxation in Jersey</span>

Jersey is a Crown Dependency with fiscal sovereignty and therefore sets its own tax rates. The island has a 'simple and stable' tax system, which does not change much over time. This is reflected in States policies, which call for a 'low, broad, simple and fair' system. Jersey does not have inheritance, wealth, corporate or capital gains tax.

References

  1. ↑ Directive 2009/132/EC of 19 October 2009 of the European Parliament and of the Council determining the scope of Article 143(b) and (c) of Directive 2006/112/EC as regards exemption from value added tax on the final importation of certain goods
  2. ↑ United Kingdom: VAT on Postal Packages, House of Commons Library, 2013, SN 4155
  3. ↑ Ireland: Relief from Customs Duty and VAT on gift consignments and consignments of negligible value imported from outside the European Union (EU) PN 1179
  4. ↑ "Changes to VAT treatment of overseas goods sold to customers from 1 January 2021". UK Government. Retrieved 3 January 2021.
  5. ↑ "New VAT and customs e-commerce rules for the import of low value consignments as of 1 July 2021". EU Commission. Retrieved 3 January 2021.
  6. ↑ "VAT free loophole to be closed by UK Treasury". BBC News. 8 November 2011.
  7. ↑ Condorgroup: "Following loss of LVCR, Condor Group to close logistics business" Archived 21 February 2014 at the Wayback Machine also webcite backup of same
  8. ↑ bbc.co.uk: "Shipping company Huelin-Renouf stops trading" 20 Aug 2013
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.