Cambodia Investment Review

Cambodian exporters prepare for new European Union VAT regulation

Cambodian exporters prepare for new European Union VAT regulation

The European Union (EU) has implemented major changes to its value-added tax (VAT) rules, which come into effect on July 1, 2021. This will impact Cambodia ecommerce businesses that sell across EU country borders (also known as distance sellers) and businesses exporting goods to buyers in the EU.

There will be two significant changes, the first will be that VAT will be charged on all ecommerce rather than just imports valued over 22 euros. The second will be the introduction of an Import One-Stop Shop (IOSS) scheme, which will promise faster delivery times and better transparency on VAT payments for buyers and sellers

EU law requires that the standard VAT rate must be at least 15% for most products.

The new rules have been implemented to reduce VAT fraud and in making the environment fairer for EU businesses to sell their products in the EU territory. This means that EU businesses will be able to compete on equal footing with non-EU businesses that are currently not charging VAT.

Cambodian based, Director of eCommerce Darren Sun said: says the IOSS scheme will have a huge impact on Cambodian businesses which sell eCommerce to buyers in the EU.

“The issue for Cambodian ecommerce merchants is that they will need to sign up with an IOSS fiscal intermediary, which has to be EU based, in order to access the benefits, the IOSS scheme offers. This has left Cambodian e-tailers scrambling to understand how to register for IOSS representatives,” Sun said.

He believes in light of the worry felt by some businesses over the change, an IOSS FAQ for has been added on the website to help buyers and sellers understand key components of the new scheme, as well as how to register.

“As the shipping sector recovers from the impacts of COVID-19, everyone wants the transition into the IOSS to be as smooth as possible, so we’ve created a comprehensive IOSS guide for Cambodian businesses on our website, so they are ready come July 1,” Sun added.

Data from the Ministry of Commerce showed that in 2020 Cambodia exported $3.2 billion of goods to the EU and imported $659 million from the bloc.

In 2020, the EU withdrew 20% of the Everything but Arms (EBA) preferential trade deal Cambodia had under its Least Developed Country statues, due to concerns over human rights.

Related Articles