Thread by @JohnNephew

Hey, the new EU rules for imports are a big headache. We have to deal with them as a publisher sending our own stuff (including mail orders and Kickstarter rewards); and we also have done worldwide fulfillment for a number of other companies. We've spent a lot of time looking at

all our options, and I just sent out a long message to our staff and clients, and thought I might just share it on Twitter in case it is of value for other industry colleagues.

The first thing to note is that this is about the 27 countries of the European Union. That does not include the UK, Norway, Serbia, or Switzerland, for example. Only the EU, not "Europe."

The EU changed their rules on July 1st concerning parcel imports. They eliminated the €22 de minimis exemption for low-value shipments. They also created the "Simplified" Internet One-Stop Shop system for non-EU-based companies to register for VAT through EU intermediaries, and

then report sales and remit collected VAT on a monthly basis for sales to all EU consumers, based on the delivery address of each package. If you have a game going to someone in Budapest, Hungary, you are obliged to collect and remit 27% VAT on the amount they pay for the goods

plus shipping. If that game went to Paris, France, it would be 20%.

The IOSS intermediary we have considered (which seems typical) offers two plans: One is €1500 per year including twelve months of VAT filings (which have to be done every month even if €0 is due); the

alternative is €500 plus €125 each month spread out over the year (so €2000 total but with a monthly installment plan). If the value of goods reported on a VAT return in a month exceed €25,000 there are additional administrative fees that get applied. It is REQUIRED to have

an intermediary that has a physical location in Europe, to register for an IOSS number -- the simpler VAT registration we got in Ireland doesn't work. Also the intermediary requires a deposit against estimated future VAT liabilities.

All told, we need to lay out something around $4200 before even being allowed to collect VAT and ship an order into the EU.

As I understand it, an IOSS registration would only be effective for the goods where we are the seller, not our third party logistics customers' goods. Perhaps we could come up with some scheme to formally buy and resell your goods to European recipients, or become a "deemed

supplier," and assume whatever liabilities would come along with that. I believe that the EU intends for each game publisher to work with an IOSS intermediary to register on your own and manage VAT for any shipments you send to European Union member states.

Also, we are now in the process of doing our first UK VAT return for shipments in the first half of 2021, and learning what kind of administrative burdens there are for tracking the necessary information for just a single country and set of VAT rates. Under the IOSS/EU scheme,

it is necessary to track the individual commodities sent to 27 different nations, each of which has its own VAT rate and categories. Example: Books are 0% VAT in Ireland, 5.5% VAT in France, and 25% VAT in Denmark. Our existing accounting system can't manage this for our own

products, let alone those of fulfillment clients, so it would require a separate, parallel set of books to be kept in a different system just to keep track of EU shipments. Then these data permutations for all twenty seven countries need to be conveyed monthly (possibly by manual

entry? or manual preparation of a huge spreadsheet?) to the IOSS intermediary for the reporting they would do on our behalf.

I have concluded that registering for the IOSS does not make sense for our own sales to EU consumers, and if we did register and figure out a way to handle EU VAT on behalf of fulfillment clients it would require a nonsensical surcharge on each package even if no VAT was due,

more costly than the alternatives. (A book sent to Ireland with 0% VAT still requires all the reporting and filing about the VAT not collected.)

For us to fulfill anything to the EU on behalf of third parties going forward, these are the options.

1. A fulfillment client provides an IOSS registration number for the package (their own number or that of a marketplace)

2. We ship by a DDU method, which makes the receiver liable to pay any applicable taxes, duties, and fees upon delivery

3. We ship by courier methods that generally cost more but still allow us to have duty/tax/fees paid at the border entry and charged back to us

More on the three options...

1. CLIENT PROVIDES IOSS NUMBER:

You may need to have an IOSS registration of your own for some reason and have the capacity to handle the added administrative burden. If you do, we can include that number in the shipping documents and make use of a

full range of shipping services for your parcels.

Sometimes you may need us to ship something that has a "deemed supplier" with an IOSS registration. (More info: avalara.com/vatlive/en/vat…). It is a little tricky to figure out what will count as a facilitating marketplace --

it is clear that eBay and Amazon qualify. If you sell something via eBay to someone in the EU on or after July 1st, eBay is responsible for collecting the VAT on the purchase and paying the VAT to the appropriate EU country; eBay should provide you with their IOSS number to go on

the parcel and the recipient should face no extra charges on delivery.

Less clear are the crowdfunding and pledge management sites. I suspect they do fall under the definition, but it may require some kind of legal ruling to make that happen if it does, because I see no

evidence that they are volunteering to do it. If you are aware of one, let me know! It would really change the whole picture for EU crowdfunding backers.

2. DDU SHIPPING

Without IOSS registration, most of our shipping methods will show up at the customer's door with a bill for applicable duty (usually none), tax (usually just VAT that is owed in any case), and fees. Exactly what the fees are is not clear right now, and it is not

clear that fees are applied consistently. To quote our man at Asendia: "Not sure on service charges, I have heard $0 and from $5 to $25. I have not heard back from any client on what charges they are getting. And doesn't seem to be any concrete information out there and even if

there was, what is actually being done may be different."

For Atlas Games, my plan is to use DDU shipping going forward for our internet sales and kickstarters. We will warn customers that it is not "EU-friendly," and that we cannot predict exactly what they will have to pay

upon delivery, depending on local taxes, policies, and bureaucratic whims. The amount extra we would need to charge in order to take care of VAT on the front end is likely to be substantially more than the service charge in most cases.

(And if anyone prefers to get a game from their local game store, that's GREAT! We still have A-OK pipelines for distribution into the EU, which is entirely outside this B2C rules changes.)

3. COURIER WITH DUTY/TAX CHARGED BACK

We have at least two options into the EU where we can have taxes and duties paid at the border by the courier and billed back to us. One is the FedEx suite of services (International Economy, International Priority). The other is the ePAQ

Elite service from Asendia, which uses DHL. We have fairly often used FedEx in the past to various countries, but usually it has been more expensive than the alternatives.

I gave our clients info on a snapshot of some rates today to the EU destinations, and an example:

A 4 pound package sent to Denmark with a $100 declared value, with today's rates (pretty typical for a board game KS)

$24.65 shipping
$3.50 our flat fee for international fulfillment
$25 Danish VAT paid (25% value of goods)
$7.50 disbursement fee

Total: $60.65

For Atlas Games and our own projects, we will move to DDU for future Kickstarters and mail orders if the customer is in the European Union. I am sure that moving to "EU-unfriendly" shipping will lose some future sales and backers who don't want an unpredictable charge on delivery

but right now it honestly looks like they will pay the same if not much more if we charge them fairly for the increased costs and administrative overhead involved in the IOSS. We're going to have to look at our outstanding obligations for past Kickstarters on a case by case basis

and will likely use a courier service for most cases where a delivery charge including VAT has already been paid. Thankfully we pushed to get a LOT shipped before July 1st, though we still have stragglers late to fill in surveys.

Also, I should note that while switching to a more expensive courier and paying a disbursement fee is an increase over previous DDP options (the VAT is the same either way), it's not nearly the increase we've seen on inbound ocean freight from China,

which is now up to around $25k for a 40-foot container, up from $3k-$4k a couple years ago. That's a cost increase we have to spread across ALL the copies of a game, not just the ones going to EU countries.

Also, big thanks to our Administrative Coordinator, Jenae Pedersen, who has been researching all the options and struggling in the trenches of actual reporting and compliance.