Norway currently has a low value VAT and customs relief for consignments not exceeding a value of NOK 350 (appr. 35 EUR). The majority in the Norwegian Parliament has decided to remove this relief from 1. January 2020.
The low value consignment relief has been subject to political discussion for a number of years. The relief was originally implemented to reduce the workload for the authorities. As more and more consumer related products are now sold online, the rule has led to a considerable disadvantage for retailers in Norway compared to foreign suppliers.
In negotiations between the governing parties and the Christian Democratic Party, it has been agreed to remove the relief from 1 January 2020.
What are the tax consequences?
When the low value relief is removed, 25% import VAT will have to be calculated on all goods that are imported to Norway, regardless of value. If the supplier does not act as importer of record, the import VAT will have to be calculated and paid by the Norwegian customer, one way or the other. On clothes and agricultural products, customs duties can also apply.
Practical challenges and potential additional cost
Imports to Norway are almost exclusively cleared for customs by customs brokers and forwarders. With the current customs declarations system and procedures, it is not possible for the customer her/himself to clear goods for customs and pay VAT and customs duties directly to the authorities. Unless changes in the procedures are implemented, the customer must therefore pay a customs broker/forwarder to clear the goods. The price of such services are NOK 150 and upwards per consignment, meaning that payment for the service easily can exceed the value of the goods.
What will happen?
So far, the practical consequences of the removal of the relief have not been analysed in detail. The authorities might try to implement a simplified system in which consumers can clear their own goods for customs and pay the VAT and customs directly to the authorities. A different option is to introduce a simplified scheme for VAT registration and reporting for non-established suppliers of consumer related products. A third option is to not implement any simplifications, and just let the importers and customs brokers handle all the extra customs admin. We think some sort of simplifications are wanted, also by the authorities, but we are not sure that there is time and ability to implement them within 2020.
Since there is a new National Budget to be negotiated prior to the implementation, the political parties might also change their opinion on the matter.
What to do?
If the new rules are implemented without any simplifications, it probably means that a lot of foreign web-shops will lose a lot of customers from Norway. The only way to safeguard against such consequences would be for the web-shop to act as importer of record to Norway and register for VAT. A lot of the big players have already done that, so the changes that we see now might be regarded as part of a more gradual process, rather than a completely new situation.
Mitt navn er Per Kirknes og jeg jobber som advokat i PwC. Mitt arbeidsfelt er merverdiavgift og toll, med særlig fokus på internasjonale forhold og cross border transactions. Jeg har arbeidet i PwC siden 2010, og har også erfaring fra tollmyndighetene.
My name is Per Kirknes, and I am an Attorney at Law working in the indirect tax team in PwC Oslo. I specialize in international trade with goods, including domestic and international VAT issues, as well as customs and excise duties. My work is often related to cross-border transactions, including structuring of supply chains and analyses of intra-group transactions. I also provides advice related to specific customs issues like valuation, origin, classification and customs procedures. I have been with PwC since 2010. Prior to that I worked ten years with development of the Norwegian customs legislation in the Directorate of Customs and Excise.