Ending low-value consignment VAT and duties exemption
Proposals to lower the current €150 threshold exemption for import duties and VAT have been modified according to the Chairman of the Committee of Finance. Instead of an earlier proposal to drop it to €45, the parliament is now proposing to scrap it altogether .
The current Ukrainian VAT rate is 18%.
The EU ended its €22 low-value consignment relief on VAT in July 2021 with the EU e-commerce package. All imported parcel consignments not exceeding €150 must have VAT charged in advance at payment. For parcels or consignments above this, VAT should be collected at checkout or paid on import at Customs.
The import VAT exemption de minimis for Ukraine and many other countries globally for low-value consignment stock relief is a tax policy that allows imported goods of low value to be exempt from VAT when entering a country.
Other countries to have reformed their Low Value Consignment Stock Relief (LVCR) include:
- Singapore in January 2018
- From July 2024 Thailand
- Malaysia in January 2024
- July 2018 in Australia
- UK from 1st January 2021
What is Low Value Consignment Stock Relief?
Low Value Consignment Stock Relief (LVCR) is a tax relief measure that applies to goods imported from outside a country’s customs territory. It is designed to simplify customs procedures and reduce the administrative burden on both customs authorities and businesses for low-value goods.
VAT De Minimis Threshold
The de minimis threshold is a specified monetary limit below which goods imported into a country are exempt from VAT. Each country sets its own de minimis threshold, which can vary widely. For example, the threshold was set at €22 in the EU until July 2021, or £15 in the UK until January 2021.
How it Works
- Importing Low-Value Goods: When goods with a value below the de minimis threshold are imported, they qualify for the VAT exemption.
- Simplified Customs Procedures: Customs authorities apply simplified procedures to these low-value consignments, reducing paperwork and speeding up the import process.
- Cost Savings: Importers and consumers benefit from not having to pay VAT on these low-value items, making international purchases more attractive.
Policy Considerations
- Revenue Impact: While the de minimis threshold simplifies trade and reduces administrative costs, it can also result in a loss of VAT revenue for governments.
- Competitive Impact: Domestic retailers may view this relief as giving an unfair advantage to foreign sellers who can offer goods at a lower overall cost due to the VAT exemption.
- Fraud Prevention: Authorities must ensure that the de minimis threshold is not abused by importers undervaluing goods to avoid VAT.
Changes and Trends
- Policy Adjustments: Countries periodically review and adjust the de minimis threshold to balance trade facilitation with revenue protection. For instance, the EU abolished the de minimis threshold for VAT on goods imported from outside the EU starting July 1, 2021, to create a level playing field for EU businesses.
- E-Commerce Growth: The rise in e-commerce has led to increased scrutiny and adjustments to de minimis thresholds as more consumers purchase low-value goods from international online retailers.
In summary, the import VAT exemption de minimis for low-value consignment stock relief is a mechanism to simplify the importation of low-value goods by exempting them from VAT, thus reducing administrative burdens and costs for both customs authorities and importers. However, it requires careful balance to manage revenue implications and competitive fairness.
