All mail shipments from third countries to Latvia will be subject to VAT

Take note – story published 2 years ago

As from July next year, for all consignments ordered from third countries, value added tax (VAT) will be paid, Latvian Post (LP) representatives told Latvian Radio August 28.

At present, for consignments ordered from third countries, value added tax (VAT) should be paid if the value of the goods exceeds EUR 22. But from July next year, VAT will have to be paid, starting at the first cent.

The new VAT arrangements for consignments from third countries will be introduced because Internet trade with them creates an unequal situation for European traders: low value goods are imported without VAT, and their total volume is huge. Irēna Knoka, head of the Customs Administration Methods Department, said that this results in revenue loss for EU countries. The introduction of the new arrangements will, of course, be a great deal of additional work for customs, since the volume of such consignments is large and can only be processed electronically. Two simplifications will be introduced, though.

"One is the so-called “import one stop shop” scheme, when VAT can be paid to registered traders already at the time of purchase. The second simplification is for post and couriers carrying out deliveries. They will be able to pay the VAT on the budget next month after the import, but to charge the recipient at the time of delivery," Knoka explained.

Shipments from third countries are expected to decline initially.

Sweden and Austria, in experimental terms in its legislation, required VAT to be paid at 1 cent.

“That first moment was very shocking for customers, and in large quantities the goods were sent back. But gradually people get used to it,” Knoka said.

Gundega Vārpa, head of external communications for Latvian Post, said that how the system will work can't yet be predicted, but hopes it will be as comfortable as possible and won't change people's willingness to shop in e-environment.

"This will certainly be a very tight period for all of us, adapting to these norms and preparing our own systems and for the State Revenue Service. When it starts, it will become a habit,” Vārpa said.

She pointed out that currently the largest volume from third countries is small-scale, low-value shipments. These kinds of shipments come from Asia's largest Internet stores. Last year, eight million small-pack units entered the Latvian Post from Asia. Jānis Grants, Chairman of the Board of the courier mail DPD Latvija, said that in general, this initiative is logical, because in this way Europe will protect its market. However, the volume of consignments from Asia may not decrease due to the new arrangements.

"In fact, the value of most of these consignments from China is sufficiently low – €5 to €10. Consequently, the amount of tax to be paid will be small, it will not change customers' habits. And a second trend: Several Chinese retailers are seeking options to introduce their own warehouses in Europe. They will therefore avoid this tax," Grant said.

Asian traders are also entering the European market because customers are no longer prepared to wait for their products for nearly a month. This reduces the delivery time.

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