Around the world, countries impose VAT style taxes on domestic supplies and imports of goods. Many countries, however, exempt “low value goods” from import VAT. For example, the EU currently exempts small value consignments of less than EUR 10 and provides that member states may exempt consignments up to EUR 22. With the rise of cross-border e-commerce, these exemptions have led to a distortion of competition, as online non-resident sellers can charge less then local retailers. In a move to eliminate this distortion as well as boost tax revenue, countries are increasingly removing these exemption thresholds and requiring non-resident suppliers to collect and remit VAT on certain supplies of such low value imports. This differs from the traditional method of collecting import VAT, which typically falls on the party responsible for clearing the goods through customs.
Source: SOVOS
