From 1 July 2021, the new 2021 EU VAT e-commerce package will come into effect. This simplifies distance selling VAT compliance, imposes sales VAT on imports not exceeding €150 and imposes VAT collections obligations on marketplaces for some of their sellers’ transactions.
E-commerce package obstacles
However, the reforms were already delayed once from 1 January 2021. And the remain some major question marks around these reforms:
- A number of countries – notably the Netherlands and Germany – are struggling to have their IT platforms ready for the new shared single EU OSS VAT return. They have asked for a second delay to the reforms, but have been turned down. There needs to be more clarity on the readiness of the 27 member states’ systems to help businesses prepare.
- Few of the 27 EU member states have issued details of the OSS or IOSS VAT return formats or upload schema’s. This means businesses cannot start to plan the IT and business process changes needed to start reporting. These details, along with registration application processes should be forthcoming.
- The import IOSS VAT return ‘Green Lane’ still has open questions on its workings. As it is a voluntary option for marketplaces and sellers, these need to be resolved to boost confidence and adoption of this important efficiency measure. reforms proposals to OSS and IOSS are being reviewed in a public consultation, with VAT Directive amendments due before the end of 2022.
- Customs checks processes are not clear on ≤€150 consignments that have already been taxed in the checkout by sellers or deemed supplier marketpalces. The concerns are that lack of proper checks on IOSS numbers could result in double taxation at the border. Refunds on these will be burdensome and may undermine acceptance.
- Member states implementation of the European Commission new rules is already showing inconsistencies. France is making marketplaces liable for all import VAT – no €150 cap. Germany is retaining its domestic VAT registration obligation.
- Member states will have the right to impose standard VAT rates on all IOSS imports to reduce their own burden to verify reduced VAT rate transactions. This creates further complexity for businesses to track, and ensure they do not lose out on over taxation.
- The member states accept that they wish to tighten the rules further in the 2022 Tax Package VAT measures. This would:
- Extend the IOSS return to all imports, not just ≤€150, to stop deliberate under valuation
- Extend the OSS VAT return to all B2C-related transactions – so sellers holding stocks in other EU member states and thus eliminate the need for direct foreign VAT registrations
VAT in the Digital Age – extension of OSS to more B2B and B2C transactions
EU VAT in the Digital Age reforms which come next include a channel on extension of OSS Single VAT Registration to all cross-border B2C and B2B transactions by EU states. This grew from the 2020 EU Tax Action Plan proposals for a fairer and more efficient EU tax regime.