As of the first of July 2021, the ‘VAT e-commerce package’ will introduce significant changes to the current VAT legislation for cross-border e-commerce trade in the EU. These new VAT rules are introduced with the goal to facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses. You can find th most notable changes to the EU VAT rules in this article.
Until the 30th of June, every EU Member State has set a so-called ‘distance sale threshold’, ranging from 35.000 to 100.000 Euro (excl. VAT), or the equivalent in local currency. Once e-commerce traders exceed the distance sales threshold for a given Member State, their B2C distance sales of goods become VAT taxable in the Member State of arrival of the goods (instead of the Member State of departure) under the current rules, entailing local VAT registration and periodical compliance obligations in said Member State(s).
As of the 1st of July 2021, these distance sales thresholds will be abolished (only a threshold of 10.000 Euro (excl. VAT) for micro-enterprises, with a very limited scope, will remain). Hence, the B2C intra-Community distance sales of goods will be principally VAT taxable in the Member State of arrival of the goods. In order to limit the VAT registration and compliance burden in the hands of e-commerce traders, it was decided to extend the Mini One Stop Shop, to all B2C services and to intra-Community distance sales of goods, making it a One Stop Shop (‘OSS’). As a result, it will be possible to report and pay VAT due on B2C services and intra-Community distance sales of goods in other Member States via a single OSS return in the Member State of identification. Businesses should investigate whether they can close their historic VAT registrations in other EU Member States due to the impact of these new rules.
As of the 1st of July 2021, the VAT exemption for the import of consignments of a low value of up to EUR 22 will be abolished. As a result, VAT will principally become due on all importations of commercial goods into the EU. In order to facilitate trade, an import scheme (I-OSS) has been created covering distance sales of goods imported from third territories or third countries to customers in the EU up to a value of EUR 150.
As of the 1st of July 2021, when the import scheme (I-OSS) is used, the seller will charge and collect the VAT at the point of sale to EU customers and report and pay that VAT to the Member State of identification in the I-OSS (similar to the OSS return). These goods will then benefit from a VAT exemption upon importation, allowing for faster customs clearance.
Businesses operating electronic interfaces such as online marketplaces or platforms will, in certain situations, be considered to be a intermediary supplier of the goods sold to customers in the EU (legal fiction). As a result, the marketplace or platform will in these situations be required to collect and pay the VAT on these sales.