You wrote elsewhere last week about the new customs duty coming into force this week on online shopping valued at less than €150, which was previously duty free. I would like to take a very specific example.
I buy roasted coffee in small quantities, not decaffeinated, from a business in the UK. It is a food and therefore is zero-rated for VAT. Accordingly, there are no charges whatsoever on the deliveries through Royal Mail and An Post.
I consulted the EU Taric system to find that my coffee from Britain is zero-rated for duty. Since it is zero-rated for duty, how can a €3 duty be applied?
BF
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Unsurprisingly, I guess, the imposition of a blanket €3 charge for online shopping under the value of €150 grabbed the headlines over the past week and it has raised questions for a number of readers – two of which we will try to tackle here.
Under the so-called “de minimis” relief that operated until July 1st – last Wednesday – the European Union decided packages with a value of less than €150 would be exempt from customs duty, largely because it was too onerous for authorities to apply.
Now, if your package comes from outside the European Union, you can expect to pay additional charges over and above the goods’ face value and postage.
I was writing about this last week in our weekly personal finance newsletter. There’s a lot of detail that people can check in that article. However, as you say, it did not cover your very specific query.
Essentially, if the new €3 duty is not charged at the checkout, you can expect notice from An Post or one of the courier firms requiring payment before they release your goods. You are also likely to pay an additional handling fee – €6.95 in the case of An Post.
This could, of course, radically change the shape of online shopping, especially for low-cost goods.
But what about your coffee?
You’ve done a fair bit of legwork, even consulting the EU Taric system. This is a database of how all goods are treated for duty and other taxes in the EU – the acronym stands for “tarif intégré communautaire”, for anyone interested.
Having wrestled in vain with that system over recent days as I tried to get to the bottom of your query, I assume you either work in this area or harnessed the power of AI to track down the Taric status of your coffee. It’s an unwieldy monster with 35,000 unique codes covering a bewildering array of items.
For instance, your coffee has a different code from decaffeinated coffee.
I am grateful to John O’Loughlin, partner in global trade and customs at PwC, for walking me through the maze.
You mention zero rating for VAT and zero rating for duty. The first thing to note is that these are two very different things. As Colin Doolin, indirect tax and global trade partner at EY, notes, just because your product is zero-rated for one, that does not mean that it is zero-rated for the other.
So the fact your coffee is zero-rated for VAT – and it is – has no direct relevance to its customs duty status. It could still be liable for duty even with a zero rating for VAT.
However, PwC’s O’Loughlin, having gone through Taric, confirms that your coffee is also zero-rated for duty.
So why should it be liable to this new €3 charge? I went back to the Revenue Commissioners.
They tell me that, despite your coffee being zero-rated, it will be subject to this flat €3 customs fee, assuming it is sent from a British warehouse, as Britain is outside the European Union.
Why so?
This €3 flat rate charge on all goods purchased online from outside the EU is a transitional arrangement, introduced in something of a hurry to protect EU business from unfair foreign competition. And because it is a temporary sticking plaster, it is being applied universally.
A permanent arrangement governing online shopping, using the EU Customs Data Hub, will come into force in the middle of 2028, with the EU “creating a tariff bracket for distance sales transactions”, O’Loughlin tells me.
All online purchases will at that time find themselves in one of five custom rate bands: 0 per cent, 5 per cent, 8 per cent, 12 per cent or 17 per cent, O’Loughlin says, adding that your coffee will return to its zero rating at that point.
So, anything you order from Britain now will be subject to the €3 charge – plus any associated handling charge if it is not levied at source online when you make the purchase – until the new regime kicks in in 2028. At that point, the tax position will revert to what it was before last week.
As an aside, if the company had a distribution centre in Northern Ireland and sent your coffee from there, no €3 duty would apply under the special arrangements covering goods moving to the Republic from Northern Ireland.
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Magazines coming from the UK
I found your article on online shopping both interesting and educational. However, one area that did not seem explicit [to me anyway] was that of magazine subscriptions coming from the UK.
I get a couple of monthly deliveries for which I paid an annual fee/charge. Will they be affected?
BS
Your query is interesting because this is far from a niche area. Thousands of people based in Ireland regularly order specialist magazines and periodicals, many of which are likely to come from Britain or even the US.
Like your fellow reader above, you are going to be hit by this €3 customs charge, given that it is a blanket temporary flat rate on all products regardless of their normal duty status.
And as you have already paid the annual charge for this magazine, it sounds as though the charge will be collected at your end – at least for the balance of this year’s subscription. Whoever delivers them to you is likely to also charge a handling fee on top of the new customs duty.
That clearly could significantly affect the cost of the magazine. PwC partner in global trade and customs John O’Loughlin notes this sector is one where the new charges could have a catastrophic effect, fundamentally changing the nature of the business.
A magazine tends to cost just a few euro – say €5 for a specialist magazine. Adding €3 to the cost fundamentally alters the economics of the purchase. And putting handling fees – An Post will charge €6.95 if it has to collect the duty from you before delivering your magazine and other couriers will no doubt do the same – means your €5 purchase could now cost you €14.95.
That’s a very different proposition.
As with our reader’s coffee above, O’Loughlin confirms that periodicals are zero-rated for customs duty. That means that when the new permanent EU customs duty regime kicks in in 2028, the cost of your magazines will return to what they were before last week – apart from any subsequent rise in the cover price of the actual magazine.
But, meantime, “anyone buying or selling low-value or low-margin goods will face a disproportionate impact from this temporary duty regime”, O’Loughlin notes.
The question is whether consumers will, by then, have walked away given the significantly increased cost of their purchase. It is a real concern, O’Loughlin, says for anyone selling such low-value items and could fundamentally change the nature of the online shopping market.
As a by-the-by, if you get more than one magazine in the package you will still be charged only €3 (plus any handling charge that may apply). However, if the package included a magazine and a pen, for instance, the charge would double to €6 as the charge is per item. Identical items count as one item, regardless of number.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
