You have probably heard some information about this topic: since July 1st, the “Import One Stop Shop” (its acronym is IOSS) was implemented, which means that VAT will be paid on all products imported from outside the European Union.
How does this measure affect our purchases on AliExpress, and can we still buy at low prices? In this article we are going to explain everything this entails.
What happens with the VAT from July 1, 2021?
Due to the VAT reform plan that the European Union approved in 2015, it was established that all products imported into the EU from July 1, 2021, will have to pay VAT in their respective countries.
Unsurprisingly, this will affect all products coming from China, and any other country outside the European Union.
What is the reason for implementing this reform?
Before the reform, the items that we could get for less than 22€, were exempt from VAT. Both sellers and buyers could take advantage of this opportunity to avoid paying taxes by declaring items for less than this amount.
Until then, the only way for the Tax Agency to corroborate whether this was true was through customs clearance. However, due to the hundreds of packages arriving per day, it was impossible to check them all.
But the states have decided to pay more attention to this situation and that is why they have changed the law. This way, they can collect everything that was escaping them.
How am I going to pay the VAT?
As we already said, it is not going to be necessary for you to do paperwork at customs clearance. Nor will Correos require you to pay any additional amount if you want the order to be delivered.
The application of the amount is done in a much simpler way for users: the IOSS (Import One Stop Shop) allows online platforms like AliExpress, to manage themselves the VAT on each product with an amount less than 150€ that is for sale.
This means that when you buy an item, you will pay the VAT directly through AliExpress and they will be responsible for settling it periodically with the tax office. In other words, your shopping experience will not change at all: you will be able to continue shopping the same way you used to.
The main modification that the reform establishes, is that Customs will no longer hold orders (unless you are buying illegal products, of course).
In the UK, AliExpress has already started using this method since the beginning of the year
While this upload was planned for early 2021, due to the situation generated by the COVID19 pandemic, it was delayed until July 2021. In some countries such as the United Kingdom, this method began to be used in January 2021 and does not seem to have generated any inconvenience.
What about AliExpress items costing more than €150?
Apparently, products costing more than €150 are the exception and will continue to cost the same as they do now.
Although it has not yet been confirmed, most likely you will not pay anything in the country of origin and, when they stop your order at customs, you will have to fill out a SAD (Single Administrative Document). This link explains the whole process.
Please note that for orders over 150€, it is recommended that you look for items that are shipped from AliExpress Plaza or warehouses that are located within the European Union. This way, you are going to avoid a lot of headaches.
What if I buy from warehouses in the European Union?
Lately, AliExpress enabled new warehouses in several European Union countries such as Spain, Belgium, Poland, France and Czech Republic. Most likely more will be enabled and here all the orders you place, will also be subject to VAT.
If you want to know more about products shipped directly from countries that are part of the European Union, read our article on the Cainiao Warehouse Standard Shipping.
So, is everything going to be more expensive?
According to what several AliExpress sellers have told us, they are willing to decrease their margins in order to compensate for this increase, although it remains to be seen what happens further down the road.
For some time now, AliExpress has become a very important international e-commerce company, generating brutal annual profits. Considering that a fundamental part of their profits are due to European Union countries it is clear that they are going to risk losing competitive prices and therefore, their clientele.
It is also true that many of the products for sale on AliExpress cost two or three times less than those available in any local store. So, despite the VAT increase, it is certainly convenient to keep buying on the Chinese platform. To this we must add the benefit of having a huge catalog of products only at the reach of a “click”.
Advantages and disadvantages of the IOSS
It can be said that the application of the tax brings us some disadvantages, although also, certain advantages:
- Those products that we buy from China will be a little more expensive than before, since we will be charged VAT.
- Sellers will most likely adjust their prices downward, so we will not notice the price increase as much.
- More and more European warehouses will be opened with a greater variety of products, so our orders will arrive in less time and we will not have to worry about being stopped at customs.