About the changes in the handling of VAT in Europe and sales tax in the U.S. regarding cross-border EC.

Thank you for your continued support. We are PKF Shiodome Partners.This time, we would like to inform you about the major break in the European VAT regulation in July’21 and the U.S. sales tax for cross-border E.C.

<Introduction of the one-stop store system for imports (European Union)>

On July 1st, Europe introduced VAT on goods purchased by individuals from non-European countries via e-commerce (EC) sites.
As of July 1, the VAT exemption for such small value items will no longer be available.
As a result, all goods will be subject to import VAT regardless of the amount.

In addition, if the goods are less than 150 Euros (approximately 20,000 yen), sellers can use the “Import One-Stop Shop” system to reduce their VAT declaration work. This means that even if you normally need to register for VAT and file VAT returns in several European Union member states, by obtaining an Import One Stop Shop number, you will be able to register and file in one country.

Companies that conduct cross-border EC sales to Europe through their own websites will need to take measures such as filing VAT returns on a regular basis.

<Online Marketplace Taxation (European Union)>

As of July 1st, online marketplaces such as Amazon and eBay that sell products of 150 Euros or less to consumers will be required to pay and report VAT on behalf of EC-sellers.

The definition of an online marketplace includes (1) the ability to control the terms of sale, (2) the ability to charge customers in terms of payment, and (3) the ability to place and receive orders. In this respect, payment processing, web advertising, and affiliate businesses do not fall under the category of online marketplaces. On the other hand, companies that fall under any of the three aforementioned conditions are not exempt from the obligation, even if they are Japanese companies.

With the recent development of IT, online marketplaces (platformers) have been expanding widely in Japan. Online marketplaces are expanding widely in Japan due to the recent development of IT. Companies in the online marketplace business should take action for the convenience of their users and to ensure compliance with EU EC regulations.

<U.S. Sales Tax (U.S.) for EC Sellers>

In the United States, there is an indirect tax (state tax) called sales tax.
In the case of cross-border EC sales from Japan to the U.S., you are required to register for sales tax and file a sales tax return if you exceed the annual threshold by state.

Taking Hawaii and Illinois as an example, if sales to consumers in the relevant states exceed $100,000 (approximately 11 million yen) in annual sales or 200 transactions per year, you will be required to register and file a local sales tax return.

When making cross-border e-commerce sales from Japan to the U.S. using your own website, you need to keep in mind sales tax reporting.

We will support VAT declaration service and U.S. sales tax declaration service in cooperation with OPTI Inc., our affiliated partner.

<Outline of OPTI>
Company name: OPTI Inc.
Address: Ogawa Bldg. 4F, 1-2-2 Uchikanda, Chiyoda-ku, Tokyo
Representative: Akatsuki Fuchigami
URL : https://www.opti.co.jp

<Contact>
PKF Shiodome Partners Offshore Business Planning https://shiodome.or.jp/contact/

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