UK and International Tax news
New E-Commerce VAT Rules In The EU From 1 July 2021
Wednesday 30th June 2021
New VAT rules come into force on 1 July which will affect B2C online sellers and marketplaces/platforms both inside and outside the EU, postal operators and couriers, customs and tax administrations, as well as consumers.
The EC has confirmed in a recent press release that from 1 July 2021, a number of changes will be introduced to the way VAT is charged on online sales, whether consumers buy from traders within or outside the EU:
Under the current system, goods imported into the EU valued at less than €22 by non-EU companies are exempt from VAT. From 1 July, this exemption is lifted so that VAT is charged on all goods entering the EU as for goods sold by EU businesses.
The EC has confirmed from studies and experience that this exemption is being abused, with unscrupulous sellers from outside the EU mislabelling consignments of goods including smartphones in order to benefit from the exemption. This loophole has allowed these companies to undercut their EU competitors and costs EU treasuries an estimated €7bn a year in fraud, leading to a bigger tax burden for other taxpayers.
Currently, e-commerce sellers need to have a VAT registration in each Member State in which they have a turnover above a certain overall threshold, which varies from country to country.
From 1 July, these different thresholds will be replaced by one common EU threshold of €10,000 above which the VAT must be paid in the Member State where the goods are delivered.
To simplify life for these companies and to make it much easier for them to sell into other Member States, online sellers may now register for an electronic portal [the ‘One Stop Shop’] where they can take care of all of their VAT obligations for their sales across the whole of the EU. This €10,000 threshold has already applied to electronic services sold online since 2019.
Online sellers can register in their own Member State and in their own language. Once registered, the online retailer can notify and pay VAT in the One Stop Shop for all of their EU sales via a quarterly declaration. The One Stop Shop will take care of transmitting the VAT to the respective Member State.
In the same vein, the introduction of an Import One Stop Shop for non-EU sellers will allow them to register easily for VAT in the EU, and will ensure that the correct amount of VAT makes its way to the Member State in which it is finally due.
For consumers, this should mean more transparency and, when buying from a non-EU seller or platform registered in the One Stop Shop, VAT should be part of the price payable to the seller. There should result in no more calls from customs or courier services asking for an extra payment when the goods arrive in the home country because the VAT has already been paid.
A similar ‘Mini One Stop Shop’ for VAT has already been running successfully since 2015 for cross-border sales of electronic services. The EC advises that its extension to online sales of goods will offer even more advantages for online retailers and consumers in the EU.
If you would like further information on the new rules, please contact Keith Rushen on 0207 486 2378.Contact Us