Modernising VAT for cross-border e-commerce
To allow the control of the OSS/IOSS VAT return by a Member State, the traders may be required to provide the records of their transactions declared under the OSS/IOSS schemes. The standardized dataset described in the Commission Implementing Regulation (EU) 2021/965 serves to mitigate the administrative burden of such enquires on taxable persons. Furthermore all exchanges of information between the Member States will be made over a secure network to ensure the protection of the data. The above provisions will apply from 1 July 2021. Further technical details on this standardized dataset (SAF-OSS XML Schema Definition) will be published in this website as soon as they become available.
Since April 1st the pre-registration in the One Stop Shops (OSS/IOSS) is available in each Member State. Businesses willing to make use of these new schemes are invited to register! Please find the contact details here. The guide to the VAT One Stop Shop (OSS) explaining in detail how to register, declare and pay VAT via the OSS/IOSS is also available! Currently in English and soon in all EU languages!
The latest MOSS statistics report is published and shows year after year an increase in VAT collected from the MOSS for the whole EU raising from EUR 2.7 billion in 2015 to EUR 5.04 billion in 2019! Although limited to telecommunication, broadcasting and electronic services, the MOSS proves the success of this One Stop Shop mechanism. This looks very promising for the launch of the VAT e-commerce package as of 1 July 2021.
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 are now available 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. The Guidance for Member States and Trade concerning the importation and exportation of low value consignments is published too.
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:
- Council Directive (EU) 2017/2455
- Council Regulation (EU) 2017/2454
- Council Implementing Regulation (EU) 2017/2459
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:
- Council Decision (EU) 2020/1109
- Council Regulation (EU) 2020/1108
- Council Implementing Regulation (EU) 2020/1112
- Commission Implementing Regulation (EU) 2020/1318
- Read the Press Release
- Q&A on VAT for e-commerce
- Commission Proposal COM(2016)757
- Commission Proposal COM(2018) 819
- Commission Proposal COM(2018) 821
- Impact Assessment
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 territories and third countries 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:
- 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 are now 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 entered 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 July 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 territories or third countries 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 IOSS. 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 IOSS 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.