On 30 September 2020, the Commission published Explanatory Notes on the new VAT e-commerce rules. They contain extensive explanations and clarifications on these new rules including practical examples on how to apply the rules if you are a supplier or an electronic interface (e.g. marketplace, platform) involved in e-commerce transactions. These explanatory notes are meant to help online businesses and in particular SMEs to understand their VAT obligations arising from cross-border supplies to consumers in the EU.
These Explanatory Notes will be soon translated in all official EU languages, as well as in Chinese and Japanese. The Explanatory Notes will be accompanied by the update of the Guide to the One Stop Shop and by guidance in the customs field.
Due to the practical difficulties created by the measures taken to contain the coronavirus pandemic, the application of the new VAT e-commerce rules is postponed by six months. Thus, the rules will apply as of 1 July 2021 instead of 1 January 2021, giving Member States and businesses additional time to prepare.
The European Commission aims at simplifying VAT obligations for companies carrying out cross-border sales of goods or services (mainly online) to final consumers and to ensure that VAT on such supplies is paid correctly to the Member State in which the supply takes place, in line with the principle of taxation in the Member State of destination.
The Commission proposed EU legislation in this area in two stages. The first measures entered into force in 2015 and covered telecommunications, broadcasting and electronic services to consumers. The second package of measures was adopted by the Council in December 2017 and extended the simplification to distance sales of goods as well as to any type of cross-border service supplied to final customers taking place in the EU. The latter measures, also referred to as ‘the VAT e-commerce package’ are set to apply from 1 July 2021.
1. Mini One Stop Shop (MOSS)
Since 2015, a simplified system is in place to declare and pay VAT on business-to-consumer (B2C) supplies of telecommunications, broadcasting and electronic (TBE) services in the EU. Detailed information on the functioning of MOSS is available on the MOSS portal.
2. The VAT e-commerce package
The VAT e-commerce package was one of the priorities under the Digital Single Market Strategy.
On 5 December 2017, the Council adopted the VAT e-commerce package consisting of:
On 21 November 2019, the Council adopted the implementing measures for VAT e-commerce package consisting of:
On 12 February 2020, the Commission adopted the Commission Implementing Regulation (EU) 2020/194 laying down details on the working of the VAT One Stop Shop.
Due to the practical difficulties created by the measures taken to contain the coronavirus pandemic, the following acts were adopted postponing the application of the VAT e-commerce package to 1 July 2021:
The VAT e-commerce package will facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses. The new rules include:
The VAT e-commerce package will be implemented gradually. Below is an overview of the key-dates:
The extension of the MOSS and the special provisions concerning the obligations of electronic interfaces will enter into force on 1 July 2021 as IT systems need to be adapted or developed.
Unlike today, when the import scheme is used, the seller will charge and collect the VAT at the point of sale to EU customers and declare and pay that VAT globally to the Member State of identification in the OSS. These goods will then benefit from a VAT exemption upon importation, allowing a fast release at customs.
The introduction of the import scheme goes hand in hand with the abolition of the current VAT exemption for goods in small consignment of a value of up to EUR 22. This is also in line with the commitment to apply the destination principle for VAT.
Who will benefit from this proposal?