Challenges to Customs Imposed by the New European Union Value-Added Tax Rules on Cross-Border E-Commerce – the Case of Bulgaria

Abstract

From 1 July 2021, new rules for value-added tax (VAT) on imports of postal and courier items entered into force in the member states of the European Union (EU). With the changes in the tax legislation of the member states, two thresholds for VAT taxation of postal and courier items from third countries have been introduced: the first for goods less than or equal to EUR150 and the second for goods above EUR150. These goods are subject to distance sale (i.e. internet sales to individuals in the EU) and are with a natural person. Three types of customs clearance are now possible for shipments in the first threshold — a standard declaration procedure, a special regime for declaration with deferred payment of import tax, and an Import One-Stop-Shop scheme (IOSS). These options greatly facilitate both importers and customs authorities, but at the same time, they create some new challenges for customs authorities, which need to be addressed. The customs formalities currently in force do not sufficiently cover the risks of fraud and error, as full physical control of these consignments is not possible. The Republic of Bulgaria is a relatively small market in the global online trade of low-value shipments, but the application of the new regulations shows certain trends in the processing of these shipments.