Everyone in the eCommerce supply chain will be affected by the new EU Value Added Tax rules coming into force on the 1st of July. From online sellers and marketplaces/platforms both inside and outside of the EU, to postal operators and couriers, customs and tax administrators and consumers will be affected by these changes.

What is changing?

From the 1st of July 2021, the EU Value Added Tax rules on cross-border business to consumer (B2C) eCommerce activities will change. The rationale behind all these changes is to overcome the barriers of 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.

Here are the main EU Value Added Tax changes coming from July the 1st

EU  value  Added tax changes

Online sellers will be able to register in one EU state

Online sellers and online marketplaces/platforms will be able to register in one EU member state and this will be valid when declaring and paying VAT on all distance sales and goods and cross-border supplies of service for customers located in the European Union.

These online sellers will benefit from a reduction in the red tape of up to 95% by registering with the new One Stop Shop (OSS)

How does the OSS work?

Each EU Member State will have an online OSS portal where businesses can register. The single registration will, however, be valid for all sales to consumers in other EU Member States.

Businesses will have to apply the VAT rate of the Member State where the goods are dispatched to or where the services are being supplied. Information on the VAT rates in the EU is available on both the European Commission website and the websites of national tax administrators.

What do you need to do if you use the OSS?

  • apply the VAT rate of the Member State where the goods are dispatched to or where the services are supplied;
  • collect VAT from the buyer on intra-EU distance sales of goods or on supplies of services;
  • submit an electronic quarterly VAT return via the OSS portal of the Member State where you are registered for OSS;
  • make a quarterly payment of VAT declared in the VAT return to the Member State where you are registered for OSS;
  • keep records of all eligible OSS sales it facilitates over 10 years.
  • show/display the amount of VAT to be paid by the buyer, at the latest when the ordering process is finalized. The VAT rate is the one of the Member State where the goods are dispatched/transported to;
  • ensure the collection of VAT from buyers on intra-EU distance sales of goods and on domestic supplies it facilitates;
  • submit an electronic quarterly VAT return via the OSS portal of the Member State where you are registered for OSS;
  • make a quarterly payment of VAT declared in the VAT return to the Member State where you are registered for OSS;
  • keep records of all eligible OSS sales it facilitates over 10 years

 

New VAT threshold

The existing thresholds for distance sales of goods within the EU will be abolished and replaced by a new EU-wide threshold of €10.000. Below this €10.000 threshold, the supplies of TBE (telecommunications, broadcasting, and electronics) services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.

Deemed supplier status

There will be new special provisions whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purpose to have received and supplied the goods themselves – called “deemed supplier”.

New record-keeping requirements

In addition, new record-keeping requirements are introduced for online marketplaces and platforms facilitating supplies of goods and services, including where such online marketplaces/platforms are not a deemed suppliers.

No more VAT exemptions for small value items

The new EU Value Added Tax exemption at the importation of small consignments of a value up to €22 will be removed. This means that all goods imported in the EU will now be subject to VAT.

But there’s more! A new special scheme for distance sales of low-value 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.

There will new simplification measures for distance sales of imported goods in consignments not exceeding €150, in case the IOSS is not used (Special arrangements).

What transactions are covered by the new changes?

  • Domestic sales of goods by deemed suppliers
  • Distance sale of goods within the EU carried out by suppliers or 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 good subject to excise duties.

What are the benefits of the new EU Value Added Tax rules?

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 the consumption of the 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.