The VAT e-commerce package is now fully complete with adoption on 12 February 2020 of Commission Implementing Regulation (EU) 2020/194. This Regulation provides the details for the registration in the VAT One Stop Shop, including the Import One Stop Shop, and for the VAT One Stop Shop return.
On 21 November 2019, the Council adopted new detailed measures that will pave the way for a smooth transition to new VAT (Value-Added Tax) rules for e-commerce that come into force in January 2021.
- Council Directive (EU) 2019/1995 amending Directive 2006/112/EC as regards provisions relating to distance sales of goods and certain domestic supplies of goods
- Council Implementing Regulation (EU) 2019/2026 amending Implementing Regulation (EU) No 282/2011 as regards supplies of goods or services facilitated by electronic interfaces and the special schemes for taxable persons supplying services to non-taxable persons, making distance sales of goods and certain domestic supplies of goods
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 of the customer, 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. The second package of measures was adopted by the Council in December 2017 and included new rules for distance sales of goods as well as for any type of service supplied to final customers in the EU. The latter measures, also referred to as ‘the VAT e-commerce package’ will apply from 2021.
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.
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 Implementing Regulation (EU) 2020/194 laying down details on the working of the VAT One Stop Shop.
Overview of the package
The VAT e-commerce package will facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses. The new rules include:
- Improvements of the current MOSS
- Special provisions applicable to supplies of goods facilitated by electronic interfaces
- Extension of the scope of the MOSS, turning it into a One Stop Shop (OSS), to:
- B2C supplies of services other than TBE services
- Intra-EU distance sales of goods
- Certain domestic supplies of goods facilitated by electronic interfaces
- Distance sales of goods imported from third countries and third territories in consignments of an intrinsic value of maximum EUR 150
The VAT e-commerce package and implementation calendar
The VAT e-commerce package will be implemented gradually. Below is an overview of the key-dates:
(see details on the MOSS portal)
- Introduction of two thresholds to simplify VAT obligations for microbusinesses and SMEs. First, an annual turnover threshold of EUR 10 000 for intra-EU cross-border supplies of telecommunications, broadcasting and electronic (TBE) services. Up to EUR 10 000 TBE supplies remain subject to the VAT rules of the Member State of the supplier. Second, an annual turnover threshold of EUR 100 000 up to which the vendor must only keep one piece of evidence (instead of two) to identify the Member State of the customer.
- For invoicing, the rules of the EU country of identification of the supplier will be applicable instead of the rules of the Member States of consumption (i.e. of the customer).
- Close a gap in the current MOSS: a business not established in the EU but having a VAT registration in the EU (e.g. for occasional transactions) can make use of the non-Union scheme (i.e. the scheme for taxable persons not established in the EU).
- Some improvements of the current MOSS enter into force on 1 January 2019, in particular those not having any IT impact.
The extension of the MOSS and the special provisions concerning the obligations of electronic interfaces will enter into force on 1 January 2021 as IT systems need to be adapted or developed.
- Businesses operating electronic interfaces such as marketplaces or platforms will, in certain situations, be deemed for VAT purposes to be the supplier of goods sold to customers in the EU by companies using the marketplace or platform. Consequently, they will have to collect and pay the VAT on these sales.
- Building on the success of the MOSS for TBE services, this concept will be extended and turned into a OSS:
- The non-Union scheme for supplies of TBE services by taxable persons not established in the EU will be extended to all types of cross-border services to final consumers in the EU;
- The Union scheme for intra-EU supplies of TBE services will be extended to all types of B2C services as well as to intra-EU distance sales of goods and certain domestic supplies facilitated by electronic interfaces. The extension to intra-EU distance sales of goods goes hand in hand with the abolition of the current distance sales threshold, in line with the commitment to apply the destination principle for VAT;
- An import scheme will be created covering distance sales of goods imported from third countries or territories to customers in the EU up to a value of EUR 150.
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.
- Where the import OSS is not used, a second simplification mechanism will be available for imports. Import VAT will be collected from customers by the customs declarant (e.g. postal operator, courier firm, customs agents) which will pay it to the customs authorities via a monthly payment.
Who will benefit from this proposal?
- Businesses will benefit from a substantial reduction in cross-border VAT compliance costs. This will facilitate greater cross-border trade.
- EU Businesses will be able to compete on equal footing with non-EU businesses that are not charging VAT.
- Member States will gain through an increase in VAT revenues of EUR 7 billion annually.