The European Union (EU), of which Estonia is a member, constitutes a political union as well as a customs union. Customs processing and taxation are largely coordinated and standardized throughout all EU member states. However, some matters, including rate of value-added tax (see below), vary from one member state to another.
Basis for Assessing Duties and Taxes
Commercial shipments originating from outside the EU are subject to duties and value-added tax (VAT). The Common Customs Tariff (CCT) governs tariffs on goods imported to the EU from non-EU countries. Within the EU, goods are allowed to circulate freely between member states. The Estonian Customs Tariff (ETT) is based on the ArcticTARIFF, a comprehensive online tariff system for customs authorities in the EU. The system is compliant with EU requirements and provides flexible and extensive functionality, allowing national legislation to be applied.
Rates of duty differ based on the type of product being imported. It is the responsibility of the importer to state the classification and valuation (see below) of the goods being presented for import. All products imported into the EU are classified using the Combined Nomenclature (CN) tariff classification system. (See the Tariff Classification page for more information.)
Import duties are generally calculated on an ad valorem (a percentage of the customs value of the goods) basis. The customs value is normally the cost, insurance, and freight (CIF) landed value. Cost is the transaction value, or price actually paid for the goods when sold for export to the customs territory of the EU.
Note that the customs value can include all of the following: transaction value, commissions, packaging, packing, component parts, amortized value of tools and dies, engineering, development, artwork, royalties and license fees, insurance, loading, and freight.
United States and European Union Trade Agreement Regarding Tariffs on Certain Products
On August 21, 2020, the United States and EU announced a trade agreement regarding reductions on tariffs on certain products of interest to each side. The agreed tariff modifications entered into effect on December 18, 2020, for the EU, with the publication in the Official Journal of the EU of Regulation 2020/2131 of the European Parliament and Council. Under the agreement, the EU eliminated tariffs on imports of certain live and frozen lobster products on a most-favored nation (MFN) basis, retroactive to August 1, 2020. EU tariffs will be eliminated for a period of five years, and the European Commission will initiate procedures aimed at making the tariff elimination permanent.
Online Customs Tariff Database (TARif Intégré de la Communauté or TARIC)
The online customs tariff database known as the TARIC contains all measures relating to the import of goods, specific to the product’s CN code. Economic operators can search by country of origin and product code to find the rate of duty, any other charges that are to be paid on import, and whether a license or permit is required to import the product into the EU.
The TARIC includes information on tariff measures, agricultural measures (additional duties, sanitary regulations, countervailing charges), commercial measures (antidumping and countervailing measures), and measures relating to the restriction of movement of goods (import and export prohibitions and restrictions). The TARIC does not contain information relating to national levies such as rates of VAT and rates of excises.
The TARIC can be accessed online at www.ec.europa.eu/taxation_customs/dds2/taric.
Value-Added Tax (VAT)
The standard rate of value-added tax (VAT) in Estonia is 20 percent. A reduced rate of 9 percent applies to some items such as certain pharmaceutical products, medical equipment for the disabled, newspapers and periodicals, books, and hotel accommodation. All taxes are applied on the CIF value and duty charged.
As of July 1, 2021, VAT must be paid on all goods imported from non-EU countries including those with a value of less than €22, which were previously exempt from VAT.
Import One-Stop Shop (IOSS)
Before July 1, 2021, e-commerce sellers needed to have a VAT registration in each EU member state in which they had a turnover above a certain overall threshold, which varied from country to country. After July 1, 2021, these different thresholds were replaced by one common EU threshold of €10,000 above which the VAT must be paid in the member state where the goods are delivered. To simplify the process and make it easier to sell in other member states, online sellers may now register for an electronic portal called the Import One-Stop Shop or IOSS (www.ec.europa.eu/taxation_customs/ioss_en) where they can take care of all of their VAT obligations for their sales across the entire EU. Since 2019, the €10,000 threshold was already applicable for electronic services sold online.
Rather than grappling with complicated procedures in other countries, they can register in their own member state and in their own language. Once registered, the online retailer can notify and pay VAT in the IOSS for all of their EU sales via a quarterly declaration. The IOSS transmits the VAT to the respective member state.
The introduction of the IOSS for non-EU sellers allows them to register easily for VAT in the EU and will ensure that the correct amount of VAT makes its way to the member state in which it is finally due. For consumers, this means increased transparency because when they buy from a non-EU seller or platform registered in the IOSS, VAT should be part of the price paid to the seller. That means no more calls from customs or courier services asking for an extra payment when the goods arrive in their home country because the VAT has already been paid.
Since July 1, 2021, VAT is charged on all commercial goods imported into the EU, regardless of value. For consignments with a value of €150 or below, this can either be charged at the time of the sale by using the IOSS, or be collected from the end-customer by the customs declarant. The IOSS allows sellers or online marketplaces to charge VAT at the point of sale and remit it directly to the authorities. Online shops can handle all VAT accounting and payment for all EU countries through the tax administration of one member state, meaning you don’t need to register in all 27 countries. To sign up to the IOSS, most non-EU sellers will have to appoint an intermediary to register and declare the VAT on their behalf, unless they are established in the EU themselves. They will then need to provide their IOSS number to the customs declarant. Certain marketplaces, rather than their sellers, are responsible for collecting, reporting, and remitting the VAT due from the end-consumer if they register under the IOSS. The IOSS will then apply to business-to-consumer imports of consignments up to €150 into the EU, facilitated by the online marketplace.
In summary, the changes that went into effect as of July 1, 2021, are as follows:
- Non-EU online shops have to pay VAT on all shipments ordered to the EU. There is no longer a tax exemption for consignments of less than €22.
- The tax liability of the special scheme arises at the time of sale (no longer upon the importation of the goods).
- A non-EU online store must be a taxable person established in the EU or appoint a special VAT representative and apply for a VAT registration number.
- VAT data is transmitted through a single tax authority to the EU member states where consumers ordered the goods during the declared period.
- VAT is reported monthly. So-called zero reports must also be submitted.
- To prevent misuse, the VAT registration number of online stores must not be published (meaning, this number may not be shown on invoices).
- All consignments must be the subject of a simplified customs declaration.
- Online shops and their agents must keep VAT records on their transactions for 10 years.
Value Added Tax Information Exchange System (VIES)
The European Commission's Value Added Tax Information Exchange System or VIES (www.ec.europa.eu/taxation_customs/vies/vieshome.do) is used for exchanging information about VAT between EU member states. It enables taxable persons to easily, quickly, and efficiently collect and report data on deliveries of goods within the community. A taxable person, identified for VAT purposes, is obliged to inform the tax office about every delivery of goods to other taxable persons, identified for VAT purposes in other member states. Users of the system can verify the validity of a VAT number issued by any EU member state.
Tariff-Rate Quotas (TRQ)
Tariff-rate quotas (TRQ), also referred to simply as tariff quotas, allow a pre-determined quantity of a product to be imported at lower import duty rates (in-quota duty) than the duty rate normally applicable to that product. TRQ are managed by the European Commission, which provides a searchable online tariff quota consultation database.
Excise duties are charged against certain commodities that are generally recognized as luxury goods. Tobacco products, perfumes, and alcohol products usually fall under this category.
In some situations, the customs office imposes additional fees based on the invoices provided for a shipment. The fee is generally imposed if the customs deem it necessary due to the size of the shipment and the related large number of invoices provided by the shipper for the goods.
An additional fee is charged on some commodities to cover the expense of conducting examinations and/or testing that is mandatory for the goods' entry into Estonia. Commodities affected include cosmetics, drugs, medicines, and artwork.
Countervailing duties are levied to counter the effects of subsidies provided by a foreign government for merchandise exported to Estonia. These foreign duties result in artificially low prices that can be detrimental to Estonia and other EU member state industries.
An antidumping duty is a form of additional duty that the importer may be required to pay when importing goods for which the prices have been dumped (i.e., goods that entail a lower price when they are exported than they would have fetched on the domestic market).
Note: The above information is subject to change. Importers are advised to obtain the most current information from a customs broker, freight forwarder, logistics professional, or the local customs authorities.
Sources: European Commission (www.ec.europa.eu); Estonian Tax and Customs Board (Maksu ja Tolliamet) (www.emta.ee)
Article written for World Trade Press by Brielle Burt, Jennifer Goheen, and Nina Bellucci.
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