Significant changes to the VAT rules applying to e-commerce transactions, particularly online sales of goods, will take effect across the EU on 1 July 2021.
Who will be affected by the changes?
Any business making or facilitating online sales or deliveries of goods to consumers (B2C) in the EU is likely to be impacted by the changes in some way.
The following types of businesses will be particularly impacted:
- Online retailers and other businesses which sell goods to EU consumers either coming from outside the EU or cross-border within the EU
- Electronic interfaces (e.g. online platforms and marketplaces) which “facilitate” (as defined – see below) sales of goods to consumers in the EU
- Postal and freight operators which handle the import and delivery of goods to consumers in the EU
- Electronic interfaces which facilitate supplies of services to consumers in the EU may be impacted by additional VAT record-keeping requirements.
An electronic interface will be deemed to “facilitate” a supply of goods or services where it allows a supplier and customer to enter contact which results in that supply being made through that interface. However, it excludes businesses solely involved in processing payments, listing, or advertising goods, or redirecting customers to other electronic interfaces.
What are the changes?
The following key changes will come into effect on 1 July 2021:
- The current VAT distance sales registration thresholds in each EU member state will be abolished. As a result, retailers and other businesses making B2C online sales of goods within the EU will be obliged to charge local VAT in the member state to which the goods are shipped (assuming the total value of their B2C cross-border sales of goods within the EU is above €10,000 per year). However, the VAT due on sales to consumers in member states in which the seller does not have a VAT establishment can be remitted through a single EU-wide VAT return known as the One Stop Shop (“OSS”).
- The current relief from import VAT for “low value consignments” of goods coming in from outside the EU in consignments with a value up to €22 will be abolished. Therefore, VAT at the appropriate rate will become due on such imports.
- Electronic interfaces which “facilitate” sales of goods to consumers in the EU may have additional VAT collection and reporting obligations as they will be deemed to buy and resell those goods where:
- The goods are shipped from outside of the EU to a consumer in the EU in a consignment with an intrinsic value not exceeding €150; or,
- The goods are shipped within the EU to a consumer and the seller of the goods is a non-EU established business.
- Subject to certain conditions, VAT on consignments imported from outside the EU with a value not exceeding €150 can be reported and paid by retailers and marketplaces through a single EU-wide return known as the “Import One Stop Shop” (IOSS).
- Postal and freight operators handling imports of goods for consumers will not have to collect VAT on packages where VAT has already been accounted for through the IOSS. However, they will still be responsible for VAT collection on other packages. There will also be some simplifications to the VAT reporting procedures for such operators for consignments not exceeding €150.
- Electronic interfaces which “facilitate” supplies of goods or services to consumers in the EU will need to keep detailed information in respect of the supplier and nature of those goods or services for a period of 10 years.
- The mini-one stop shop (MOSS) which currently allows suppliers to report VAT in multiple EU member states on B2C supplies of telecom, broadcasting and electronically supplied services will be extended to all types of services. This may be availed of where the supplier owes VAT on a B2C supply of services in an EU member state but is not established in that member state (for example, admissions to certain events, certain hiring, and transport services).
Prepared for ISME by: Byrne & McCall, Core B, Block 71, The Plaza, Park West, Dublin 12.
Tel: (01)612 0580 Fax: (01) 620 5625 email: [email protected] www.byrnemccall.ie