All e-commerce stores are in the EU are being modernized with a cross-border VAT, from online sellers and marketplaces/platforms both inside and outside the EU to postal operators and couriers, customs, and tax administrations, right through to consumers.
The European Union mentioned after the rules come into force in its state members will make the digital economy fairer for everyone and more competitive for e-comm's outside and inside the EU.
What is changing?
From 1 July 2021, the VAT rules on cross-border business-to-consumer (B2C) e-commerce activities will change. The rationale for these changes is to overcome the barriers to cross-border online sales and address challenges arising from the VAT regimes for distance sales of goods and for the importation of low-value consignments.
The main changes are the following:
Online sellers, including online marketplaces/platforms, can register in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU.
They will benefit from a reduction in the red tape of up to 95% by registering with the new One Stop Shop (OSS).
The existing thresholds for distance sales of goods within the EU will be abolished and replaced by a new EU-wide threshold of EUR 10 000. Below this EUR 10 000 threshold, the supplies of TBE (telecommunications, broadcasting, and electronic) services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.
Special provisions are introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”).
In addition, new record-keeping requirements are introduced for online marketplaces/platforms facilitating supplies of goods and services, including where such online marketplaces/platforms are not a deemed suppliers.
The VAT exemption at the importation of small consignments of a value up to EUR 22 will be removed. This means all goods imported in the EU will now be subject to VAT.
But help is at hand! A new special scheme for distance sales of low goods imported from third territories or third countries will be created. The Import One Stop Shop (IOSS) has been created to simplify the declaration and payment of VAT.
Finally, simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 will be introduced, in case the IOSS is not used (special arrangements).
Which are the transactions covered by the new changes?
- Distance sales of goods within the EU carried out by suppliers or deemed suppliers;
- Domestic sales of goods by deemed suppliers;
- Supplies of services by EU and non-EU sellers to consumers in the EU;
- Distance sales of goods imported from third territories or third countries carried out by suppliers and deemed suppliers, except for goods subject to excise duties.
What are the benefits?
- Consumers will appreciate knowing that when buying goods online from outside or inside the EU, the VAT rate applied is the same as for goods acquired in their home country - the new rules make sure that VAT is paid where consumption of goods takes place
- EU businesses will be able to grow in a simplified, fairer environment and overcome the barriers to cross-border online sales - the European Digital Single Market aims to make technology work for people in a fair and competitive digital economy;
- EU citizens will see public revenues increase - thanks to increased VAT payments and less VAT fraud, all Member States will benefit.