On July 1, 2021, new VAT regulations for e-commerce will come into force due to the changed EU directive and the implementation directive. It is therefore time that all companies with e-commerce activities prepare for it.
Due to the Corona crisis, the European Commission postponed the entry into force of these new VAT regulations from January 1st to July 1st, 2021.
So there is not much time left to comply.
The new rules have two objectives: (i) to simplify the collection of VAT on cross-border “internet sales” of goods and services to consumers (B2C) and (ii) to ensure fair competition inside and outside the EU.
What exactly is going to change?
Several changes are being made to the current system. Below we highlight the most important changes:
1. No more thresholds and VAT is due in the country of destination
The cross-border distance selling of goods to consumers within the EU is now taxable in the EU member state to which the goods are delivered.
But only …
- if the local distance selling thresholds are exceeded and the seller is responsible for the transport or otherwise facilitates it. Some examples of such thresholds: For sales to Germany with an amount of more than 35,000 EUR per year or for sales to the Netherlands above 100,000 EUR per year, the local VAT must be charged.
- if the supplier explicitly opts for VAT to be levied in the Member State of arrival.
From July 1, 2021, this local threshold will be abolished.
As a result, the VAT applicable in the EU country of destination of the goods is due from the first distance selling.
A distance seller can still choose to apply VAT in the Member State of his establishment, but only if intra-Community B2C sales are below EUR 10,000.
2. Expansion of MOSS or mini one-stop shop
The MOSS or mini one-stop-shop system is being expanded to include all types of B2C services and goods offered online.
This system already exists for certain companies (telecom and electronic service providers). It enables them, even if they have to collect foreign VAT, to submit the VAT return only in one EU member state, usually in the member state of the establishment or in the member state of identification (for non-EU companies).
From July 1, 2021, distance sellers can also use this system.
These distance sellers must therefore register in the Member States of destination and submit VAT returns in these Member States.
3. Introduction of IOSS
Distance buyers who import goods from third countries with a goods value of up to 150 euros are subject to VAT in the EU member state of the country of destination of the goods. The import is therefore exempt from VAT.
The distance seller can opt for this system and must then state the VAT due in MOSS, more precisely in “Import-OSS” or I-OSS (Import-One-Stop-Shop-System).
This IOSS system is not compulsory, but if it is not applied, imports will be subject to VAT.
4. Value added tax even on purchases of little value
In principle, all goods imported into the EU are subject to VAT. Currently, however, low-value shipments (maximum EUR 22) from outside the EU to customers within the EU are exempt from VAT.
This exception will also be abolished.
5. What do we recommend?
We recommend all companies with a web shop or e-shop to take the necessary measures now to be prepared for the entry into force of the new VAT regulations.
From this point on, every online sale to a foreign customer (B2C) is subject to VAT in the foreign customer’s member state.
We don’t need to explain to you the importance of VAT compliance, with the risk of tight controls and heavy fines.
Also, don’t forget that for B2C sales via a webshop, the correct sales price including VAT must be given. In other words, it is extremely important to give consumers in each EU Member State the correct prices, taking into account the applicable VAT rate. To do this, your webshop must be set up in such a way that you can determine where the customer is. This automatically has an impact on your cookie policy.
But no worry. There are also many good things about this new legislation.
The new VAT rules for distance selling will be simplified as VAT is always levied in the country of destination of the goods. In addition, MOSS and I-OSS systems make it easier for web shop companies to choose an EU member state from which they retain all VAT administration.
