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Online orders from outside EU to get pricier, more bureaucratic

A Customs official has previously estimated that up to 40 times more packages will require clearance from officials.

Postin työntekijöä pakettiautomaatilla.
Posti worker delivers a package to a self-service pickup box. Image: Posti

From this July online shoppers in Finland will pay more for goods ordered from non-EU countries, due to new European Union regulations.

Currently, packages from outside the EU that are valued below 22 euros have been exempt from VAT and not subject to customs clearance and duties.

However, a new EU law that goes into effect on 1 July will remove the exemption and all imported items from outside the EU, regardless of how little they cost, will require customs clearance.

When the law is implemented online customers will need to pay additional fees, and in some cases, jump through extra hoops to get their hands on imported goods.

How much will prices rise?

Going forward, in most cases goods ordered from outside the EU valued at less than 22 euros will be subject to VAT, according to Sami Finne, VP of international eCommerce at Posti, Finland's national postal service.

"I'd estimate that more than 90 percent of orders will be subject to a 24 percent VAT rate. For example the VAT on magazines and books is 10 percent," Finne explained.

Meanwhile, for example, an item subject to a 24 percent VAT rate priced at 20 euros would end up costing a consumer just under 25 euros after July 1.

Story continues after photo.

Sami Finne
Sami Finne, Posti's VP of international eCommerce. Image: Posti

Other costs can emerge as well. In some cases consumers will need to pay a 90-cent service fee to Posti, for example, if an order is made with an online merchant that does not include the VAT in the final checkout price.

Finne said the vast majority of, for example, Asian and US online merchants were already capable of facilitating VAT payments directly. In such scenarios, the only additional cost to the online shopper would be VAT.

In tandem with the new tax regulations, the EU is setting up a central system, the Import One-Stop Shop (IOSS), for consumers to pay VAT directly in online stores.

"At the end of this year, I estimate that VAT will be paid directly to online stores in about 70 percent of orders," Finne said, explaining that there will likely be a transition period of a few months for retailers to catch up with the new system.

Online consumers could also be faced with a 90 cent service charge if Posti ends up having to seek out customer information for customs clearance purposes, for example if the shopper didn't provide those details when placing the order.

Consumers could face another, higher fee of 2.90 euros if they need to use the Customs website to enter customer information or to pay VAT on an ordered product and the shipment ends up in temporary storage in a customs warehouse.

Story continues after photo.

Postin verkkosivuilta otettu kuva lähetyksen seurannasta.
Posti package delivery tracking service website. Image: Lucas Holm / Yle

Finne said about one million tax-free parcels valued at less than 22 euros are ordered every month by consumers in Finland. At the same time, Posti only delivers about 20,000 packages valued at 22 euros or more per month.

Finne said that Posti does not anticipate making a profit from the service fees and that they were established to cover additional costs incurred from storage and handling services provided while waiting for customers to pay the taxes on them.

Customs fees for pricier items

The incoming EU regulations only apply to goods valued at under 150 euros. After that price barrier is breached, consumers will pay not only VAT but also customs duties.

The level of customs duties depends on the country of shipment as well as the type of goods being ordered.

The agency has set up a customs duty calculator.

Yle News tried out the calculator. For example, a pair of men's leather shoes ordered from the United States, valued at 350 euros with a shipping cost of 50 euros ended up costing significantly more.

The shipment, according to the calculator, was subject to a customs duty of 33 percent, plus VAT of 24 percent, bringing the total cost of the order to nearly 660 euros.

Story continues after photo.

Customs new online VAT and import duty calculator
Yle News tried out Finnish Customs' online calculator to see how much it would cost to import a pair of shoes from the United States. Image: tulli.fi

On top of the new VAT fees, online buyers will sometimes need to put in some additional effort when placing orders. If purchases are made with merchants who aren't linked to the IOSS system, consumers will need to pay VAT via Posti or Customs.

In such cases, Posti will need to fill in missing information for the imported item if the customer hasn't already provided it - resulting in a request to the purchaser to manually fill in necessary details for customs clearance.

Finne said that the best way to avoid this is for consumers to shop at sites that offer the ability to pay VAT at the time of purchase. That way, packages will not be delayed due to issues like missing customs information or VAT payments.

Other changes

Delivery times are also set to shorten somewhat, following the automation of Posti's package logistics centres, according to Finne.

"It will be possible to save half a day in Finland. Almost all non-EU packages will also be processed automatically in the future," he said.

According to the Ministry of Finance, the coming law change will improve the competitiveness of EU-based firms, compared to ones located outside the bloc.

However, the number of packages that Customs will need to process is expected to significantly increase.

About a year and a half ago, Customs' foreign trade and taxation department chief Jarkko Saksa estimated that the incoming VAT law would multiply the number of packages requiring Customs' clearance by up to 40 times.

According to Saksa, under current rules Customs processes around 300,000 packages a year. Under the new rules, according to his estimate, Customs could end up processing more than 10-15 million parcels annually.

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