More changes on the horizon – the VAT e-commerce package

As the dust settles on Brexit, businesses will have to prepare for another wave of change on the VAT front – the implementation of the VAT package on e-commerce.

In general, these new rules will see the end of the current EU rules on “distance selling” and the introduction of the One Stop Shop (OSS) for cross-border sales made in the EU. Under current EU distance selling rules, an EU supplier is required to invoice and account for national VAT (i.e. VAT in the country where it is established) on a cross-border delivery of goods to non-commercial customers (i.e. private individuals) until it exceeds a certain threshold in which case it is required to register and charge VAT in the country where it is located his client. The threshold varies from country to country and is set at € 35,000 or € 100,000. As such, an online supplier selling goods to customers across the EU is required to follow the threshold in each EU country and, once exceeded, must record and account for VAT on the supplies made. to customers in that particular country.

From July 1, 2021, these individual thresholds will be abolished and replaced by a single EU-wide threshold of € 10,000. Suppliers who do not meet this threshold will still be required to register and account for VAT in the country where the customer is based, but rather than having to register separately for VAT in each country, it will be possible for a supplier to use the OSS to make a single VAT return to report the VAT charged on sales made in different EU countries. The OSS will be an extension of the Mini One Stop Shop (MOSS) which works in a similar way and currently allows providers of electronically delivered services to register and declare VAT on sales made in different EU countries through a only VAT return.

Since Brexit, UK suppliers are no longer bound by EU distance selling rules. Instead, goods supplied to EU customers must be imported into the relevant EU country, with EU VAT paid at the border. There is currently Low Value Shipment (LVCR) relief for imports valued at € 22 or less, which means that no VAT is due when these goods are imported into the UK. EU. This relief will be removed from July 1, 2021 and all imports will be subject to EU VAT. However, when the value of the goods sold is less than € 150, it will be possible for suppliers to use the One-Stop Importation Window (IOSS), another EU simplification measure, to declare VAT from the EU. EU due on these goods at the time. rather than at the point of import. The rules for low value shipments mirror those introduced in the UK after Brexit, whereby UK VAT on the sale of goods imported into the UK with a value not exceeding £ 135 is charged by the supplier at the point of sale and accounted for by the latter. through its UK VAT return, rather than paid as import VAT at the border.

Regarding the sale of goods above 150 €, the existing rules will continue to apply. Generally speaking, the goods will have to be imported into the relevant EU country and when the non-EU supplier maintains a stock of goods and uses it for the domestic supply of the goods, he may be required to record and account for VAT in the country. where these sales are made.

The latest change from July 1, 2021 is that online marketplaces and / or platforms facilitating deliveries of goods will be deemed for VAT purposes to have received and supplied the goods themselves and therefore will be responsible for the collection. and the payment of the VAT due on them. Provisions.

While these changes are intended to simplify the current rules and streamline the process, they create additional complexities for businesses that will need to familiarize themselves with the new rules and understand how they will work. OSS and IOSS should in theory simplify the VAT compliance process, but will still require businesses to track supplies made in the EU to ensure that the correct rate of VAT is charged on goods – this whose suppliers are negotiating below current thresholds or benefiting from the LVCR may not have necessarily had to face previously, as well as the additional costs that will be incurred in making returns under the OSS and the IOSS.

These rules were originally supposed to come into effect on January 1, 2021, but have been delayed due to the Covid-19 pandemic. A request for further postponement of the introduction has been made recently by some member states, but has been blocked, so preparations are underway to meet the July 1 deadline.

{UK e-commerce sellers face an additional £ 180million in administrative costs as the EU imposes sweeping value-added tax reforms on sales outside the bloc, according to a consulting firm.

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