Package tax 2 Euros: Sounds simple, is complicated

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With “Zwei Euro Paketabgabe” (Two Euro Package Fee), Austria's federal government shocked online retailers in April, but at the same time left many questions unanswered. The draft law is now available. Much is expected to change, a little later, and a little more expensive – except for all those who can claim input tax deduction, in simplified terms, normally VAT-liable companies that order something. No package tax will be levied on packages mediated for them.

Even the term “package tax” is vague. Because the two euros net will be levied either per package or per distance selling order, even if the order triggers multiple packages – be it because a subscription is involved, or because the sender splits the order into multiple packages. The taxpayer can choose the taxation variant for each quarter. The package tax explicitly applies even if the retailer delivers the packages themselves.

The taxpayer is any “mail-order company” that generated 100 million euros in “mail order” in the preceding financial year in Austria. The threshold of 200 million euros announced by the Ministry of Finance to heise online in April is therefore not correct – however, the calculation is special: On the one hand, orders from normal VAT-liable customers are not considered. On the other hand, all revenues generated by selling via online marketplaces such as Amazon Marketplace, eBay, Media Markt, Shein, Shop-Apotheke or Temu are included. Austria wants to tax the marketplace operators, not the actual retailers. The operator will likely recoup this through higher retailer fees.

There is no tax relief if the customer returns a shipment. Even if the package is lost on its way to the customer, the mail-order company must pay the two euros – unless it can prove (!) that the package never came into the possession of the putative recipient. Such proof is unlikely to be worth the effort.

2 Euro = 5.13 %

On average, the two euros represent a taxation of 5.13 percent per order or delivery, according to the official impact assessment. In reality, it is of course more, because the tax will be reflected in the sales prices. This results in additional VAT, so that in most cases it will be 2.40 euros – in reality even a little more, because the taxpayer has to refinance administrative costs.

Orders that do not fall under distance selling are exempt from package tax, including pure business-to-business deliveries, sales by non-entrepreneurs, orders in the store with later delivery, or deliveries collected at an establishment operating under the retailer's brand. However, if consumers, public institutions, farmers taxed under a flat-rate VAT scheme, small entrepreneurs exempt from VAT, doctors, non-profit associations, etc. order a delivery from a large retailer or via a large online platform to their location, the new tax will apply. In principle, because the legal text shows remarkable exceptions.

What is a package?

Much depends on the term “package”. The draft law refers to the Postal Market Act, the interpretation of which in turn requires reference to the international Postal Package Agreement, its Regulations and additional agreements. For example, shipments weighing more than 31.5 kilograms are not considered packages, as a document from the responsible regulatory authority shows. The regulations of the Universal Postal Union also set the limit at two meters in length or three meters in girth. Larger or heavier shipments should therefore be exempt from package tax because they are not considered packages.

However, the Postal Market Act refers to handover to a postal service provider within the country. If an imported package, for example, were handed over to a delivery person in Freilassing who then crossed the border and delivered in Salzburg, it would have to be exempt from package tax according to the draft law.

Further requirements include addressing and usual packaging, as a postal service provider would accept. “Deliveries of food or meals in packaging unusual for postal items (e.g., in open sacks instead of packages) should therefore not be covered, which also typically excludes food delivery services,” the government clarifies. So restaurants can breathe a sigh of relief.

Since the Universal Postal Union prescribes Latin letters and Arabic numerals for addressing, a shipment marked only with a barcode or RFID tag would also be exempt from package tax. This could work well if deposited in a pickup locker.

The postal regulations also include restrictions regarding content, for example for immoral items, cash, dangerous goods, lithium, medications, biological substances, or live animals. Whether packages not permitted in postal shipping would be exempt from package tax if self-delivered remains unclear.