VAT compliance simplifications; new tax collections role for marketplaces
On 1 July 2021, the European Union introduced three key reforms to simplify their B2C e-commerce VAT regime, and help eliminate an estimated €1.5 billion in fraud affecting the EU B2C goods sector. The reforms will close several VAT exemptions, make pan-EU reporting easier and make online marketplaces responsible as the ‘deemed supplier’ for VAT liabilities of the transactions of their third-party sellers on their platforms.
The e-commerce package is part of a wide-range of EU VAT reforms stretching over ten years. The reforms, including the launch of new pan-EU VAT returns Import One-Stop Shop (IOSS) and the One-Stop Shop (OSS), come in three parts:
1 Withdrawal of Distance Selling Thresholds; OSS return
Prior to 1 July 2021, EU or non-EU sellers of B2C goods did not have to immediately VAT register in each EU state where they sold goods from one EU state to consumers another state. Read about withdrawal of EU distance selling threshold here. Instead, they could rely on the distance selling thresholds set by each country, and charge the VAT of the country where the goods were located prior to sale and only report the VAT in that country under the regular VAT return. This avoided the need to have multiple VAT returns, with the expense and distraction or VAT compliance, whilst the business grew its EU customer base.
The EU introduced on 1 July the new One-Stop-Shop return to report such distance sales each quarter to the tax authorities of the EU state where the seller is resident. Non-EU sellers can use a variation, Non-Union OSS, and select any ‘member state of identification’ country to register for their EU distance sales. Read about OSS One-Stop Shop here. A range of B2C services including in OSS has been extended, and also includes the MOSS e-services services regime
2 Ending the €22 import VAT exemption; sales VAT on €150
Up until 30 June 2021, online sellers (EU or non-EU) could sell single consignments of good(s) from outside of the EU VAT free if they did not exceed €22. This ended on 1 July 2021 when import VAT must be paid on all imported sales to EU consumers. This can be done in two ways:
- Imported consignments being sent to EU customers not exceeding €150 should now have VAT of the consumer’s country of residence charged in the checkouts. So import VAT collections are moved from customs clearance to the point-of-sale. The seller has three options for managing this VAT
- Rather than get VAT registered in each EU state that the seller has eligible import sales, they can chose to opt of the new Import One-Stop Shop (IOSS) return. This single return covers all EU members states, and can be filed in the country of resident of an EU seller, or any EU state for non-EU sellers (‘non-Union IOSS’). Such non-EU sellers will need an IOSS Intermediary in most cases.
- Use the Special Arrangements route, and have their postal operator, express carrier or other EU customs agent declare the import and VAT as a direct or indirect customs representative.
- Imported consignments being sent to EU customers exceeding €150
3. Marketplaces deemed supplier VAT liabilities
The EU member states have now made online marketplaces responsible for the VAT liabilities of the some of their third-party seller’s transactions. This only cover VAT responsibilities, and the marketplace does not take on product liability, environmental, safety or other obligations. The two types of transactions on their platforms are:
- EU and non-EU sellers importing consignments to EU consumers not exceeding €150; and
- Non-EU sellers selling goods already in the EU at the time of the sale to an EU consumer at any value.
The criteria for marketplace deemed supplier include any or all of the following criteria:
- sets terms and conditions of the sale;
- Authorises the charge for payment to the customer; and/or
- Organises the goods delivery
EU VAT in the Digital Age reforms
|EU VAT in the Digital Age|
|3 reforms to improve efficiency of VAT for all and reduce fraud|
|1. Single VAT registration in the EU; extension of OSS to B2C own stock movements||2025: Following the 1 July 2021 introduction of the One Stop-Shop (OSS), extended to cover movement of own stocks prior to cross-border B2C to reduce the foreign, non-resident VAT registrations & returns. Plus to movements of own stock with ending of 'call-off' stock burden|
|More details on Single VAT Registration in the EU|
|Marketplaces deemed supplier for EU sellers|
|EU IOSS mandated for marketplaces|
|EU tackles misuse of IOSS numbers|
|Quick fixes to existing e-commerce VAT rules|
|Call-off stock VAT simplification ends|
|Harmonisation of B2B Reverse Charge rules|
|2. Digital Reporting Requirements; e-invoicing||2028: Mandatory digital reporting of intra-community transactions; obligation to be able to issue and receive intra-community e-invoices; member states free to impose own e-invoicing or real-time reporting but most conform to EU e-invoice standard EN 16931|
|Read more about EU Digital Reporting Requirements (DRR)|
|E-invoices mandated intra-community supplies 2028|
|EC Sales lists replaced by Digital Reporting Requirements|
|2014 EU legal permissions for e-invoicing lifted|
|3. VAT treatment of the platform economy||2025: Travel & accommodation sharing platforms to become deemed supplier / liable to users' VAT. New definitions of the roles of providers, users and platforms to avoid double and no-taxation|
|Read more - Travel & accommodation platforms deemed suppliers for EU VAT|