2025 VAT in the Digital Age reforms extends electronic interfaces’ deemed supplier obligations to included EU sellers’ goods sales. Follows Jul 2021 obligations on non-EU merchants’ sales
Marketplaces, or ‘electronic interfaces’ are set to become responsible for their EU-resident sellers’ B2C goods transactions from 1 January 2025 as part of the EU VAT in the Digital Age reforms package. This levels the playing field with non-EU sellers’ transactions will have been the marketplaces’ responsibility for VAT invoicing and collections since 1 July 2021. The changes apply to EU and non-EU resident marketplaces.
Currently, marketplaces are only responsible for EU sellers’ imported B2C sales where the consignment intrinsic value did not exceeding €150. Whereas the marketplaces are currently also responsible for the VAT collections on non-EU sellers’ sales within the EU irrespective of the value of the sale. It is this latter scenario that is being extended to EU sellers’ transactions from 2025. Aside from additional VAT obligations (see below) this will mean further marketplace OSS record keeping obligations, too.
What is a facilitating marketplace for EU VAT?
The EU defines marketplaces as electronic interfaces, which covers online marketplaces, portals, platforms or similar electronic means for sellers and buyers to meet and conduct transactions. When determining if the electronic interface facilitates a seller’s transaction and therefore triggers the VAT deemed supplier obligations, all of the following three criteria should be met:
- Electronic interface sets the contractual terms & conditions
- It authorises the request for payment from the customer
- It orders or delivers the goods
However, where the marketplace only takes on any of the following roles, then it is not a deemed transaction:
- Listing or advertising goods
- Payment processing
- Redirects to other sites for the transactions to be executed
Effecting the deemed supplier marketplace transaction
The marketplace must undertake two transactions to effect the deemed supplier procees – between the seller and then the customer:
- Zero-rated sale from seller to marketplace: if import (1. Above) then outside of the scope of EU VAT so zero-rated. If EU sales (2. Above) zero-rated with right to deduct sale from seller to marketplace.
- Local VAT sale by marketplace to consumer, based on country of residency of the consumer. The VAT collected is then due to the tax authorities.
Digital services and deemed supplier
In addition to goods, marketplaces are today treated as the VAT deemed supplier on all of their third-party sellers’ sales to digital services to EU consumers. In this case, the marketplace may opt to use the Union OSS return, as above. NOTE: non-EU sellers non-Union OSS should be used if the marketplace is not resident in the EU.
Marketplaces not resident in any EU member state are equally liable for the deemed supplier rules. They too can use the OSS and IOSS return, including the non-Union OSS. They will have to appoint an IOSS Intermediary (Fiscal Representative) for the IOSS only.
IOSS and OSS record-keeping obligations
Since July 2021, EU imposed on EU and non-EU marketplaces detailed record-keeping obligations to support their use of the IOSS and OSS Special Schemes. In addition to master data on their sellers, they must maintain detailed transactional data for at least ten years.
You may read more about how marketplaces use IOSS here.
July 2021 – Non-EU sellers transactions marketplace VAT obligations
As part of the 1 July 2021 EU e-commerce reform package, online platforms (electronic interface) now take on the VAT obligations of certain transaction of their third-party sellers. Although their remains a Special Arrangements loophole.
2021 e-commmerce package – marketplace take on their sellers’ EU VAT obligations
In an effort to reduce VAT fraud and simplify the VAT compliance burden for sellers and the tax authorities, the EU shifted from 1 July 2021 certain VAT collection and reporting obligations from sellers to a facilitating marketplaces. This will cover EU and non-EU marketplace transactions where:
- Imported sales from outside the EU to EU consumers of consignments where the intrinsic value did not exceeding €150; and
- Sales of any value by non-EU sellers on marketplaces when the goods were already in the EU at the time of sale.
In the above two cases, the marketplace will first buy the goods from the seller at zero-VAT, and then immediately sale the goods to the seller’s customer with the VAT rate of the customer’s country of residence. The marketplace must then report and pay the VAT to the appropriate member state of the consumer. This may be done via
- Import One-Stop Shop IOSS return for imports consignments not above €150; and
- One-Stop Shop OSS return for sales of goods within the EU
Marketplaces also face new e-commerce VAT invoice requirements if they use OSS or IOSS.
Special Arrangements exception
Marketplaces do however have the option to avoid the new rules. Instead, they may pass the obligations for VAT collections and reporting to postal services and customs agents. This is the so-called Special Arrangements. However, the EC is proposing that marketplaces must use the IOSS from January 2025.
EU VAT reforms