2021 was a year of changes in regards to VAT and e-Commerce in Europe. The UK officially left the EU since January and many businesses are still feeling the impact of all changes that came along with Brexit.
At the same time, everyone is being affected by the global pandemic and trading has seen a shift from physical stores to online shopping. As a result, e-Commerce has seen a boost in terms of growth and large marketplaces have recorded unprecedented profits during the last two years.
On top of these changes, the EU set a date for introducing the VAT e-Commerce package which includes new rules regarding e-Commerce and VAT which took place in July 2021.
These rules are having an immediate effect on all businesses in the supply chain such as individual sellers and marketplaces. All distance sellers within the EU or trading with the EU now need to redefine their VAT requirements. GVC offers a variety of services in relation to the new EU VAT rules.
The VAT thresholds set by each country used to cause an enormous administrative burden for sellers and governmental organizations. The unified threshold aims to simplify the process of VAT reporting as one threshold of €10,000 will be used for all EU members.
At the same time, the adoption of the new One Stop Shop (OSS) will help businesses register for VAT in only one Member State from which they can report VAT for all of their EU sales combined.
The new rules should help a lot in reducing VAT fraud and in making the environment fairer for EU businesses to sell their products in the EU territory. This means that EU businesses will be able to compete on equal footing with non-EU businesses that are currently not charging VAT.
It is predicted that Member States will gain an increase in VAT revenues of EUR 7 billion annually
In this short video, we offer an OSS checklist for sellers as well as our insight on what sellers need to consider after the EU VAT changes take place. This is part of our OSS webinar. You can view the full video by clicking here
All B2C sales within and towards the EU domain were affected by the VAT e-Commerce changes in July. Of course, all sellers are affected but also every aspect of the supply chain was impacted as well such as postal operators, couriers and customs offices. Consumers also started to feel the impact of these changes as they saw an increase in prices from imported items and in some cases VAT will have to be paid by the consumer directly to the courier or postal operator for delivery of low value consignments imported from outside the EU.
As we mentioned above, all distance selling thresholds were removed and only one threshold is now in place of €10.000 which takes into consideration all sales within the EU territory excluding the seller’s country of establishment.
In the past, each country had a different VAT threshold, which made things more complicated for sellers and government organizations.
For example, France at the moment has a VAT registration threshold of €85,800 while Germany has a €22,000 threshold.
One of the biggest changes that took take place in July is the expansion of the Mini One Stop Shop to the new One Stop Shop (OSS) for goods and services. This expansion extends the use of the MOSS to all B2C services and distance sales of goods within the EU and to certain domestic supplies of goods facilitated by online marketplaces (OMP’s)
Registering for the OSS is only possible for EU entrepreneurs in the EU country of residence. If you are located outside the EU, you can choose the Member State of registration yourself but you will require an OSS or IOSS intermediary. The country from which you ship goods to consumers may be the best choice.
Global VAT Compliance can help you register for the OSS and take care of all of your VAT obligations so you can focus on your expanding business. Avoid any delays and reduce the impact of the e-Commerce changes by having a qualified VAT expert assess your situation.
As mentioned above, the €22 low value consignment relief for consignments entering the EU is now abolished. As a result, every consignment that enters the EU from a third country is now liable for import VAT.
For this reason, the new Import One Stop Shop (IOSS) was introduced.
The Import One Stop Shop is a portal similar to the OSS where businesses can register in order to comply with their VAT obligations on distance sales of imported goods to the EU. The IOSS will be available starting July 1st 2021 and it will allow suppliers and electronic interfaces selling imported goods to buyers in the EU to collect, declare and remit VAT to the tax authorities instead of making the buyer pay the VAT at the moment the goods are imported.
Both schemes OSS and IOSS will have a two-fold purpose. They will help combat VAT fraud in the EU while at the same time simplifying the process of collecting and declaring VAT by companies. This will ensure fair competition for EU companies and at the same time, EU consumers will appreciate knowing that when buying goods online from outside or inside the EU, the VAT rate will be the same as for goods acquired in their home country.
The IOSS is used by companies who import goods valued less than EUR 150 and it can simplify their VAT declaration as well as payment of VAT for the goods sold by distance sellers or electronic marketplaces who facilitate sales of goods.
Once registered, businesses will receive an IOSS VAT number which can be used by postal operators and courier services for importation of the goods through customs. Customs authorities will verify the number’s validity and the package will then move on to its final destination. This will be valid for all EU Member States.
The total value of the consignment will be taken under consideration even if the consignment consists of more than one item. Goods subject to excise duties (such as liquor and cigarettes) and used goods (such as refurbished phones or laptops) are not covered by the IOSS.
Registrations for the IOSS are open since April 1st for all EU member states. If a seller is not EU based then an IOSS EU intermediary will need to be appointed in order to fulfil the seller’s VAT obligations under OSS.
Is your business involved in eCommerce? Are you a digital service provider? Our VAT advisors are ready to offer you in-depth bespoke VAT consultancy services for your company.
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Online marketplaces that facilitate distance B2C transactions may be required to collect and account for VAT on these sales as they will be deemed supplier of the goods.
VAT is collected by the marketplace when the sale takes place and is reported in the new online systems Import One Stop Shop (IOSS) and One Stop Shop (OSS).
Marketplace sellers will still require to obtain EU VAT registrations in each country where their goods are stored.
A marketplace is a deemed supplier if it facilitates:
New record keeping obligations are also introduced for online marketplaces even if the marketplace is not considered to be a deemed supplier. Under the new rules, they will still require to keep records of their transactions. These records should be kept for at least 10 years in order to be made available electronically to the EU member state authorities should they are requested.
If sellers have difficulties in collecting taxes during checkout or they do not want to register for the IOSS then they could opt for the special arrangements scheme. This is an alternative simplified way of collecting import VAT in case the IOSS is not used. This is applicable only for consignments below €150 and only if the EU country of destination of the goods is the same EU country of importation.
In this case, the seller does not charge VAT at the moment of sale but VAT is requested from the final recipient of the goods (buyer) by the company presenting the goods to customs. This company can be a courier company or postal carrier. VAT can be collected from the customer before delivery or at the moment of delivery. Different ways of collecting VAT from consumers exist and multiple applications are being developed in order to facilitate this collection procedure.
The scheme is designed for dropshipping businesses and will be implemented by postal operators and express carriers in the EU who typically declare low value goods for importation.
While still amidst the after effects of Brexit and COVID-19 on VAT, companies will have to quickly comply with these major changes that took place this July.
As Tax Specialists, Global VAT Compliance can help you become compliant in every VAT related aspect of your business. Contact GVC for a VAT assessment and become ready for the upcoming changes.
Last update: 30/07/2021