From 1 April 2020, Norway will require non-resident suppliers of “low value” goods to Norwegian consumers to charge VAT on such supplies. Norway is the latest in a series of countries to take this step ahead of similar changes scheduled to begin in the European Union next year.
Around the world, countries impose VAT style taxes on domestic supplies and imports of goods. Many countries, however, exempt “low value goods” from import VAT. For example, the EU currently exempts small value consignments of less than EUR 10 and provides that member states may exempt consignments up to EUR 22. With the rise of cross-border e-commerce, these exemptions have led to a distortion of competition, as online non-resident sellers can charge less then local retailers. In a move to eliminate this distortion as well as boost tax revenue, countries are increasingly removing these exemption thresholds and requiring non-resident suppliers to collect and remit VAT on certain supplies of such low value imports. This differs from the traditional method of collecting import VAT, which typically falls on the party responsible for clearing the goods through customs.
In July 2018, Australia became one of the first countries to implement such a change, requiring foreign suppliers of goods with a custom value of AUD 1,000 to Australian consumers to collect and remit output GST on such supplies. Switzerland and New Zealand soon followed suit, implementing their own version of the new rules in January and December 2019, respectively. The EU is scheduled to eliminate its low value imports exemption and implement a special scheme for imports under EUR 150 from 1 January 2021.
Norway will require that foreign suppliers with an annual Norwegian turnover of NOK 50,000 and who make supplies of goods with a value of NOK 3,000 (per item) to Norwegian consumers register, collect and remit VAT on such supplies. Suppliers can register via the special VOEC (VAT on E-Commerce) scheme. Suppliers already registered under the VOES (VAT on Electronic Services) Scheme may use their VOES number in place of registering for a VOEC number. Additionally, when a supplier makes a sale through an electronic marketplace, the marketplace and not the supplier, must collect the VAT.
As this trend continues, businesses should consider the following questions when determining if they are liable for VAT in jurisdictions which have implemented such rules:
- In defining “low value goods” does the jurisdiction look at the value per item, per consignment/shipment, or per invoice?
- Is there a threshold on the amount of annual sales necessary to trigger VAT liability for non-resident suppliers? If yes, is this threshold based solely on supplies of low value goods or does it include other sales sourced to the destination country (such as supplies of electronic services) or even possibly the business’s global turnover?
- If a sale is made through an electronic marketplace – does liability for VAT fall on the supplier or the marketplace?
- Is there a special VAT registration, payment or reporting regime related to these supplies?
- If a company is liable for low-value imports does this effect their VAT liabilities for other imports?
As countries continue taking steps to increase tax revenues, businesses must keep up with changing regulations to remain compliant with VAT obligations around the world.