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Consumers will face VAT and customs duties from 1 January if they buy UK products; however, the changes are likely to lead to increased tax collection for the government.
Revenue has outlined the costs that consumers will face as of January 1. Anything priced below € 22 will not face any additional import charges. But if the goods are valued at more than € 22 including shipping, delivery, insurance and handling charges, VAT will be paid.
If the goods are valued at more than € 150, consumers will face not only VAT but also customs duties. The charges will be applied by the retailer selling the products or by the authorities here upon arrival.
The revenues have provided some examples of how the charges could affect consumers. A purchase of sporting goods for € 65 will not face customs duties, but will be subject to VAT. Which would add € 13.65 to the cost of the merchandise, excluding shipping. Therefore, the price of the merchandise would increase to € 78.65.
However, if the sporting goods cost more than € 150, the charges increase substantially. Revenue gives an example of an item with a price of € 167, it will be subject to a customs duty of € 20.04 and VAT of € 39.28.
That item will end up costing € 226.32, which is almost € 60 more.
The 12% customs duty will apply to different bands as the value increases. Therefore, an item valued at € 167 will face the following customs duties, 12% of € 97 + 12% of € 40 + 12% of € 15 which is € 20.04.
Those rates could change and depend on what any possible Free Trade Agreement contains.
A fixed VAT rate of 21% applies to all goods over € 22. But the applied tariff rate differs depending on what is being purchased, so the Treasury will apply a complex list of rates.
However, after July 1 next year, the new EU e-commerce rules will mean that all purchases from online sellers outside the EU will be subject to VAT, including those under € 22.
Courier companies are taking steps to address the charges. If customs and VAT are waived by the UK based seller, the delivery companies will declare the goods and the charges will need to be paid before delivery.
The changes are likely to result in a big profit for Revenue as you are preparing to apply VAT and customs charges to goods being imported from the UK. Last year, Ingresos applied taxes and duties to 100,000 parcels, which represented a net balance of 7 million euros.
But Irish consumers shop for 70% of our online purchases in the UK, so the number of packages that will be taxed and duty-bound is expected to increase rapidly in 2021.
However, Revenue has pointed out that it has no way of knowing whether consumers will continue to shop in the UK in such an amount when additional charges begin to apply.
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