The new European Union cross-border VAT e-commerce rules are set to come into force on 1 July 2021.
If you move or supply goods to the EU or Northern Ireland, here’s what you need to know.
What are the new e-commerce rules?
The new regulations are designed to make life “simpler and fairer” for traders. In reality, this means addressing barriers to “cross-border online sales” and challenges “arising from VAT regimes for distance sales of goods” and for the “importation of low value consignments”.
According to the EU tax authority, the main changes – set to come into force from 1 July 2021 – are as follows:
- Online sellers, including online marketplaces and platforms, will need to register in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU.
- The existing thresholds for distance sales of goods within the EU will be abolished and replaced by a new EU-wide threshold of €10,000.
- Below this €10,000 threshold, the supplies of telecommunications, broadcasting and electronic (TBE) services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.
- Special provisions will be introduced whereby online marketplaces and platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves – known as the “deemed supplier”.
- New record keeping requirements will be introduced for online marketplaces and platforms facilitating supplies of goods and services, including where such online marketplaces or platforms are not a deemed supplier.
- A new special scheme for distance sales of low value goods imported from third territories or third countries will be created – known as the Import One Stop Shop (IOSS).
- The VAT exemption at importation of small consignments of a value up to €22 will be removed. This means all goods imported in the EU will now be subject to VAT, but simplification measures for distance sales of imported goods in consignments not exceeding €150 will be introduced, providing the IOSS is not used.
Who will be affected?
The EU tax authority says everyone in the e-commerce supply chain will be affected by the new rules. This includes online sellers and e-commerce marketplaces both inside and outside the EU, as well as postal operators, couriers, customs and tax authorities, and even consumers.
What are the benefits of the new system?
The EU says the reforms alone could save businesses up to 95 per cent, or up to €2.3 billion (£1.9 billion) a year, in compliance costs.