VAT rule changes from 1st July – what it means for you
From 1st July 2021 the EU is making changes to its VAT rules. The new rules apply on orders valued at under €150 to customers in the EU. As a marketplace, it is now Folksy’s responsibility to collect and pay VAT on these orders.
Therefore from 1st July, we will be handling the VAT for you. Folksy will now be the “deemed supplier”. This means that, as a seller on Folksy, you are not responsible for collecting and reporting VAT, and you do not have to register for IOSS (the EU’s Import One Stop Shop) – unless you also sell through your own website.
What we are doing
Updating our system to deal with the new EU VAT rules is complicated, as each member state has different rates. We are currently setting up a solution which will charge customers from the EU the correct rate of VAT at the point of sale. Customers from the EU will see the VAT that will be added to their order before they checkout.
Until that is in place, we will be paying the VAT on all EU orders – and your customer should not be charged VAT.
When you receive an order from an EU customer, we will send you an email explaining what you need to do.
In the longer term, we are hoping to show customers from the EU the price of items and the rate VAT on all item pages – ie while they are browsing the site and before they get to the checkout page.
We have also added a notification on all listings under the ‘Returns & Shipping Policy’ to inform customers that they may have to pay VAT charges. This reads: “Please note that if your order is being posted outside mainland UK, you (or the recipient) may have to pay customs or VAT charges and a handling fee. The seller is not responsible for any charges or fees that may incur.”
What you need to do
If you receive an order from the EU of €150 or less (roughly equivalent to £135), we will collect and manage the VAT on that order. You do not have to collect the VAT or register for IOSS. However, there are other steps you need to take before posting.
1. Include Folksy’s IOSS number on your commercial invoice
Make sure Folksy’s IOSS VAT identification number is included on your commercial invoice. The invoice also needs to show the amount of VAT paid. Your commercial invoice needs to be attached to the outside of your parcel and clearly visible, so customs officers don’t have to open the package to find it.
If you are using a Royal Mail online postage service such as Click & Drop or another courier, you will need to enter our IOSS number on their system – please check the individual provider’s guidance for details (see more below).
You will be able to find our IOSS number on the sales notification email and also on the order details page in your seller dashboard.
2. Do not bundle together orders
If your EU buyer has placed multiple orders with you, do not bundle them together if their value comes to greater than €150 (or £135). Send each order individually, as it was placed.
3. Follow the usual guidance for selling overseas
To send orders overseas, you still also need to meet the existing post-Brexit requirements for customs clearance. This means you also need an EORI number, HS commodity code and completed commercial invoice. Read our guide here – Folksy guide to selling to the EU and overseas after Brexit
It’s worth noting that Electronic Customs Data is now mandatory when sending goods abroad. As customs officials may reject parcels without it, Royal Mail and other couriers may not let you send parcels abroad without the first having submitted the customs data to them electronically. Find out more here – https://www.royalmail.com/business/international/guide/electronic-customs-data
Sending with Royal Mail
If you are using Royal Mail’s Click & Drop service, there will be a box in the form where you can input the IOSS code. If you only sell through Folksy, then you can add our IOSS number to the pre-registration scheme number field. More information here – https://www.royalmail.com/business/international/guide/delivered-duties-paid/ioss-faqs
If you are using the Post Office over-the-counter service, you will need to give them Folksy’s IOSS code along with your EORI number and HS tariff codes for the order, so they can input them on their system. In this case writing the IOSS number on the outside of your parcel can be a good idea, as it makes it easier for them to type it in correctly. We understand that Post Offices are slowly rolling out the capability to input IOSS numbers, so please check with your individual branch as to whether they can handle it yet.