Wix eCommerce | How Brexit Will Impact Cross-Border eCommerce Sellers

Hi everybody. Welcome to our WIX E Commerce event. Today we're going to be speaking to you about how Brexit will impact cross border e commerce sellers. So welcome as we wait for everybody to join us in the audience today, please feel free to share your website links in the chat. Drop them there, let us know exactly where you're coming from. We have our team joining us today to answer all of your questions in the chat, so feel free to ask anything that you need there. Both the WIX team as well as our panelists teams will be available with you today in the chat to answer your questions. We will be recording today's session and it will be available for you afterwards. So don't worry, you'll be able to watch the session again. We will be sending out an email with the video to everyone who registered and you can also just go to the WIX E Commerce school and the recording will be available for you there. So for those of you who are not familiar with WIX E Commerce, we are an E commerce solution. Whether you're an entrepreneur starting an online business, a retailer moving your store online, or an e commerce brand already selling millions of dollars online, the WIX E Commerce solution enables you to launch, manage and scale your e commerce business successfully. We have over 180 million users worldwide, 5 million premium users, and over 500,000 active stores selling around the world. So today we're going to be talking about Brexit and how that is impacting e commerce. So essentially Brexit is the withdrawal of the United Kingdom from the European Union that will officially take place at the beginning of next year. One of the major changes for e commerce businesses is, and that is when the UK leaves the EU and Customs Union, single market and VAT regime. And that's happening on the 1st of January 2021. And although not directly related to Brexit, we also can't ignore the UK's new e commerce reforms also coming on the 1st of January 2021. So all of these changes will impact cross border e commerce merchants around the world, but particularly British companies selling globally, British companies already selling in Europe and foreign brands currently selling in the UK and across the eu. So businesses both in the UK and abroad will need to prepare their e commerce operations for a post Brexit world, especially with regards to these new regulations and customs. So today we're going to be speaking with three leading e commerce industry experts in the UK about these coming changes. They'll share their insights about Brexit and its impact on international e commerce. Sellers and they'll talk about the new regulations, customs requirements and just what exactly Brexit will mean for cross border E commerce throughout Europe. So I'm going to ask them to please introduce themselves. Richard, let's start with you.

Thank you, Liat. Hello everyone. Welcome to this webinar. Hope you're keeping safe and well wherever you are. I'm Richard Askwith. I'm the VP of Global Indirect Tax at Avalara and I've spent a fruitful, an enriched life studying VAT rules so that you don't have to. However, for a brief period, I'm afraid you're going to have to learn a bit about what's going on because it's going to be affecting E commerce in phenomenal ways, whether it's customs, whether it's vat, all the things you're going to have to worry about to keep your goods moving and minimize tax. So my job at Avalar is I spend a lot of time working with our technology people who create wonderful products that help calculate those taxes, manage the import VAT and keep you VAT registered wherever that may be. So delighted to join you today.

Thank you Richard. And I can say that most of us have never been this delighted to talk to a text person before. So we're super. Kunle, over to you please.

Hi there, I'm Kunle Campbell. I am the host of two X E Commerce and I pretty much run a community of e commerce retailers across the world and marketers. I'm an advisor to a few ambitious E commerce businesses. I'm based in the UK but yeah, my community is global.

Thank you. And our cherry on top, Neil.

I've been called a cherry on top before. Thank you very much. Hi, my name is Neil Kushal. I am the CEO for Globally. We are a technology company who work with E commerce online retailers. We build into an E commerce platform and we provide localization services. So if you're a brand who sells cross border, then by working with Globally we provide currencies, payment methods, duties and tax calculations, shipping returns, fraud management, et cetera, so that you have a fully localized experience for your consumer wherever they are in the world. We work with 500 brands around the world, including Marks and Spencer's, Versace, Hugo Boss, and so I can talk to you a little bit today about what those 500 brands are doing, particularly from a consumer experience point of view in a potential WTO post. Brexit world.

Excellent. Thank you. So I think we're just going to dive right into it and let's start with the biggest question on every e commerce business's mind these days and that is the impact on international e commerce. So, kune, I'll start with you. How do you foresee Brexit affecting online retailers in the UK and the eu?

So I'll start out with the fact that obviously the EU is one trading block with a common legal framework and with the UK living it's going to become 27 countries. I think e commerce businesses and online retailers should really think about it in three ways. It's going to affect three key parts of their businesses. One is how they sell to customers essentially in the eu, if you're a UK business and how EU business is selling to the UK will just change the way they sell from a taxation standpoint and many other areas. The other is the supply chain and warehousing, essentially looking really at the end to end supply chain, identifying products and services that geographically have interactions in the eu. And the third really is the operation, so whether it's staffing, the legal taxation framework and regulations in general. So if you have a mini task force to take on these three aspects, I think essentially you'd be well covered.

Thank you. Yeah. So Neil, I mean you're obviously working with a lot of big brands. How are you seeing these implications?

I think there's a lot of confusion and people are. Many brands are still unclear exactly how it works. I think if we think about what Richard's going to talk us through, first thing you've got to understand what the implications of the tax, what they are both inbound and outbound for returns for VAT reclamation on returns for all kinds of things. So first is understanding how the taxes will apply. Then secondly, it's working out what you're going to do with your consumer experience. What are you going to do? Are you going to build those additional costs and duties and taxes into the product price? Are you going to pass them on to the consumer? What is the way that you're going to try to smooth that journey for the consumers as much as you possibly can because there are going to be additional costs. As it stands at the moment, it may all change if a last minute deal gets done. But as it stands today, there will be additional costs and it's how you're going to manage those. And so we can talk a little bit about that later.

Great. Yeah, I think that you definitely need to be prepared. Businesses need to have the plan A, the plan B, the plan C. We'll hope for the best, but be prepared for everything. So Richard, I Think we will hit you now with the hard questions that are really top of mind for most of the businesses at the moment. And that is how Brexit impacts sellers in terms of VAT.

Yeah. So when the UK leaves the VAT regime on 31 December, it also leaves the Customs union as well. We always tell people to prepare for three big changes just before I come to VAT. On the customs side, it's definitely declarations. So about 250,000 UK businesses will be affected by. We'll have to complete customs declarations for the first time, and no one knows exactly on the EU side, but we think it's about 200,000 businesses. Then there'll be. The second question is tariffs. We don't know that that's dependent on the ongoing negotiations. I'm not sure if we'll get a moment to come back to this, but one thing we've noticed is whatever the outcome of Free Trade agreement, most E commerce will be subject to tariffs, despite what you're hearing about a no tariff deal. Now, getting to your main question, VAT. So the UK is out of the EU VAT regime from 2021, the start of it. Now, what does that mean for e commerce sellers now? A bit like customs, a new tax legislative curtain, if you like, comes down over the English Channel between the UK and the eu. So any goods moving between those now, the rules change. A lot of the simplifications, a lot of the reasons, justifications for not getting VAT registered in Europe or in the UK whilst the UK was still in the EU VAT regime disappear. So basically the message is you're probably facing more VAT registrations if you want to continue selling either from the UK into the eu. And we're seeing that hitting a lot, particularly smaller E commerce businesses who suddenly, for the first time, will no longer be able to sell under their UK VAT registration. So they lose what's called the distance selling thresholds. So they'll have to get VAT registered in a lot of extra countries immediately or continue selling. And what's really been surprising, I think for the past few days because everyone's going into hyperdrive now on Brexit. You know, the reality is here we've been distracted somewhat by Covid, but we're seeing even the largest brands are actually deciding to cancel on a few countries, the smaller countries, particularly in Central and Eastern Europe, because of the loss of these types of simplifications. So that's on the distance selling. The other big change with the VAT registration rules is around sellers on E commerce platforms because they're insisting that you, the seller, take care of the vat, take care of the new customs obligations, whether it's declarations, whether it's paying the tariffs before you can start to sell on the platform. And that goes both ways. Always think about Brexit as affecting both sides of the English Channel. So if you're an EU seller into the uk, it affects you too. And if you're a UK seller into the eu, then you've got a problem there. And what the marketplace is, just very briefly, what the marketplaces are insisting on from Amazon and ebay all the way downwards increasingly, is that the sellers must get the goods over the English Channel and into a third party warehouse. So that means you've got to take care of all those declarations or the vat. I think the good news is you've still got a bit of time before you get into serious trouble. Even if you do miss some of the deadlines around the 1st of January, there certainly will be some leniency by the tax authorities. We're seeing HMRCs being very, very positive on the other side of the English Channel. They seem to be a bit more strict. So a lot to think about. But don't panic. I think that's the message I would put out there. It's four or five simple things that you can be doing now to keep your goods moving and keep the imports, VAT and haves minimized.

So I think on the don't panic. I think that's so important, Richard. And I'll just say to everyone watching today that we will be sharing best practices on how you can get prepared. We'll be giving you the checklist of all the things that you need to run through, all of Richard's advice here and the things that you need to run through. So I think the idea is be prepared, understand what's coming and we'll try and help as much as we can on this end. But Richard, while we're talking about all these changes, could you also maybe explain a little bit about the new E commerce reforms which are coming about the same time?

Yeah, yeah. So it's curious that in the uk, our tax authorities here, hmrc, they seem to think that we had nothing to do on the 1st of January and they seem to have forgotten about Brexit because they've also loaded onto the E commerce sector a new set of rules around E commerce goods and shipments in and out of the uk. We call this the E Commerce package. The EU has A similar package, very, very similar, which they've delayed until the first of July largely because of COVID They thought it was too much to impose this. But the UK is going ahead. Now. There's three things to remember about the E Commerce package. What's changing? Number one, if you've been selling to UK consumers, so whether you're a UK seller or an overseas seller, so from the eu, from China, from the us, it doesn't matter, you'll have been able to sell to any UK consumer. And if the value of the sale, the consignment is £15 or under, then you've been able to send that through VAT free. The goods just pass straight through UK customs. That relief got abused heavily, so the UK is closing it. It's called a low value consignment relief now instead. And this is where it gets tricky and it's a bit of a surprise because people have, have barely understood Brexit and they certainly haven't understood the E commerce package. But the second piece of reforms is for sellers again, UK or overseas sellers. If you're selling goods which are being imported into the UK directly to your consumer and the value of your consignment does not exceed £135, so that's the new magic number to keep in your head, £135, then you can't rely on, on paying the import VAT, the UK import VAT at Customs anymore either. Whether you're taking care of it as a seller, as a nice customer experience, which I know Neil would talk a lot about, or whether you just want to leave it to your UK consumer to pay instead, you're going to have to charge UK VAT in the checkout. Again, this is an area that Neil and his team will be heavily involved in. You're going to have to charge it, you're going to have to be UK VAT registered, you're going to have to make quarterly declarations into hmrc. That's not a problem for UK sellers, obviously, because they're almost certainly already VAT registered. But where we see it's going to catch out a lot of eu, Chinese, US sellers is they're unaware that they have to be UK VAT registered now. So from the first of January, so that's just a few weeks away now, we see a lot of reforms in vat and the question we always get asked is, yeah, very interesting, really, but am I going to get caught now? You are on these ones. Two things are going to happen to make this an absolute brick wall. Number one is your goods will almost certainly get stopped by UK customs, because they will see if you haven't correctly charged UK VAT if you don't have your UK VAT number on the consignment. And then number two is then once the goods do arrive and HMRC will be reconciling it through to your VAT return. So if you're not making a declaration there, then you'll have a problem. So basically your goods will get stopp. Second thing is, your customer will not be able to get the goods until they've been notified by customs that the goods have arrived. So they're going to have to come and pay VAT there. And there's a good chance if you have charged them correctly VAT in the checkout, if you haven't declared it properly to customs, then customs will try and charge your customer VAT again. So get double whammy. So there's a real double taxation problem here, which obviously will.