The VAT e-commerce package and what’s changing in 2021 – Tax

Malta: The VAT e-commerce package and the changes in 2021

The basic idea of ​​VAT law is that VAT is payable in the Member State where the supply is made and this is in line with the principle of taxation in the Member State of destination.

To achieve this, there have been various changes over the years detailed below.

changes take place

2015 changes

In 2015, a significant change took place, with respect to certain services, including telecommunications, broadcasting and electronically supplied services (TGA), which are supplied to final consumers, the place of supply was shifted to the customer’s place of supply. Because of this, different suppliers had to register for VAT where their customers were located or opt for the simplification mechanism and register for the MOSS (Mini One-stop Shop) system and pay VAT in the Member State of identification, what doing so would in turn redistribute the VAT collected to all the respective consuming Member States.

2019 changes

Two thresholds have been introduced to simplify VAT compliance for smaller businesses.

• a) A EUR 10,000 limit was introduced to allow cross-border providers of telecommunications, broadcasting and electronically supplied services (TGA) that do not exceed this annual turnover limit to calculate VAT according to the location of the provider.




• b) A EUR 100,000 limit was introduced so that cross-border providers of telecommunications, broadcasting and electronically supplied services (TGA) who do not exceed this annual turnover threshold may only provide one instead of two proof of where the customer is is defined.

Further changes have been made in relation to invoicing, so that the rules of the Member State of identification of the supplier apply instead of the rules in force in the Member State of consumption.

Some other improvements have been implemented in the MOSS system and, in addition, companies that are not based in the EU but have an EU VAT number can use the non-Union system.

2021 changes

The most important changes will take place in 2021. Due to the circumstances of COVID-19, the changes originally scheduled to come into force on January 1st, 2021 have been postponed by 6 months and will now come into force on July 1st, 2021 for Member States to now have more time to prepare. These 2021 changes are referred to as the “VAT eCommerce Package”.

The following laws have been passed to postpone the application of the e-commerce VAT package to July 1, 2021:

VAT e-commerce package overview

Extension of the current MOSS system

The MOSS system will be further developed into the OSS system (One-Stop-Shop Scheme) as it becomes applicable to other services as well as to intra-community distance selling of goods to final consumers.

• one) OSS will apply to service providers whose place of performance is different from where they are established and therefore previously had to register in these different jurisdictions (e.g. providing transport services, etc.). Through the OSS system, they can register for OSS and pay VAT through the Member State of identification.




• b) OSS will remove the previous thresholds for distance selling of goods and, for EU suppliers with an annual turnover of more than 10,000 euros, intra-Community distance selling will be deemed to have taken place in the Member State where the transport of goods ends. In this case, they can opt for the OSS system, which would simplify their VAT compliance obligations and pay all VAT through the OSS declaration, instead of obtaining VAT identification numbers in the different jurisdictions where their customers are located .

The Import One Stop Shop System (I-OSS).

From 1 July 2021, the concept of distance selling extends to B2C sales of goods transported from outside the EU by EU or non-EU suppliers.

There is currently a tax exemption for imports with a shipment value of up to 22 euros. This exemption from VAT for small consignments does not apply, instead an import regulation comes into force that allows distance selling of goods imported from third countries up to a value of 150 euros.

For goods not exceeding 150 euros there is a VAT exemption on import and the seller charges VAT at the point of sale to EU customers and declares and pays this VAT via the I-OSS to the Member State of identification.

Where the import OSS cannot be used, another simplification mechanism is available. Import sales tax may be collected from customers by the declarant including the postal operator, courier company, customs agent. They pay it monthly to the customs authorities.

The I-OSS is less advantageous than the OSS system mentioned above as it only applies to imports not exceeding a consignment value of EUR 150 and requires monthly reporting.

Digital platforms and online marketplaces

Businesses operating online platforms and electronic marketplace interfaces that enable distance selling may be considered to be the purchaser of the goods and their onward delivery to end customers in the EU for VAT purposes. In this respect, they are obliged to collect and pay the sales tax themselves, even though they are intermediaries. They can also register for the OSS and I-OSS to simplify their VAT compliance obligations.

This article was originally published by Malta Business Weekly on January 14, 2021.

The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.

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