The Norwegian Ministry of Finance has published a consultation proposing to abolish low value consignment relief from 1st January 2020.
Under current Norwegian VAT rules, although most imports of goods entering Norway are generally subject to import VAT, there is an exemption for goods of low value which will not be subject to VAT or duties. Low value goods are currently defined as goods with a value of NOK 350 or less.
This measure was aimed at ensuring the customs office does not have to allocate important resources reviewing imported goods which would not provide significant revenue to the state budget while also ensuring the flow of imported goods to Norway is not affected.
The draft regulations propose to withdraw this relief and replace it with new measures. Sales of low value goods would still benefit from an exemption. However, an obligation to register for VAT would arise when the total value of deliveries of low value goods to recipients in Norway would exceed NOK 50,000 during 12-month period. The proposed legislation would also raise the cut-off threshold for being classified as a low value good to NOK 3,000 (the new threshold would apply for customs duties as well). Essentially, this means that sales of low value goods made by businesses outside the country to Norwegian customers may trigger a requirement for the supplier to register for Norwegian VAT and charge local VAT at the point of sale.
No threshold would apply for import of food and foodstuff, hence import VAT and duties would be triggered immediately upon importation.
As well as non-resident suppliers, marketplaces such as Amazon and in certain case, redeliverers will need to comply with the need to register and account for local VAT.
A simplified registration and reporting system will be set up as an extension of the existing Norwegian simplified scheme for VAT on cross border B2C sales of electronic services. Suppliers who have not yet exceeded the registration threshold, may choose to be registered in this system in anticipation of breaching the limit.
The changes proposed by Norway are in line with similar trends in other developed economies. According to the public consultation paper on this new proposal, the Norwegian system is largely based on the Australian regime for low value imports introduced in July 2018. New Zealand will roll out a similar regime as well in December 2019, while the EU also plans on abolishing its low value consignment relief in 2021.
This measure is being taken by tax authorities around the world to level the playing field between foreign and domestic online sellers. As the explosive growth of e-commerce has meant that an increasing volume of trade is escaping the tax net. Also, the threshold has enabled large amounts of fraud through deliberate under-reporting of import values.
At Accordance, we are monitoring the progress of this development and shall report updates as they unfold.