European Union introduces new VAT rules
In the European Union, reforms are being carried out regarding the value added tax in cross-border provision of services, distance selling and e-commerce. The European Union is introducing new VAT rules for cross-border e-commerce, which take effect on July 1, 2021.
The Hadjivangeli team has prepared a quick overview of the key innovations that will take effect on July 1, 2021:
1. The scope of the existing “Mini One Stop Shop” (MOSS) is expanding to a One-Stop-Shop for distance selling of goods. Applies to sellers from third countries.
As you know, in 2015, a simplified Mini One Stop Shop (MOSS) “mini one stop shop” system was introduced. The system regulated the declaration and payment of VAT for the supply of telecommunications, broadcasting and electronics (TBE) services from business to end-user (B2C) in the EU.
The new rules, which come into force in 2021, expand MOSS’s operations to a “One-Stop-Shop”. The main goal is to enable sellers to fulfill their obligations to collect and pay VAT in one of the EU countries by submitting a single EU VAT return through the digital online portal OSS (“One Stop Shop”). Previously, declarations were filed separately in each jurisdiction.
The main characteristics of OSS are:
- simplified VAT rules for businesses selling goods and services across the border within and within the EU;
- easy access to other e-commerce markets;
- reduction in VAT administration costs by EUR 2.3 billion per year.
It is worth noting that sellers who store products in warehouses in different EU member states will still be required to register as VAT payers in the countries where these warehouses are located. Registration will also be required for non-residents.
The main goal of the innovation is to stimulate cross-border online commerce in the EU by reducing the administrative burden of paying VAT on sellers.
2. Fight against unfair competition in the import of goods.
Consignments of imported goods, the value of which does not exceed 22 euros, are not subject to VAT today. Unfortunately, this has led to the emergence of unfair competition. First of all, because sellers from third countries deliberately understated the value of the goods to avoid taxation.
To combat this type of fraud, this exemption will be canceled and all imports of goods will be subject to VAT, regardless of their value.
For the sale of goods, the value of which does not exceed 150 euros, from July 2021, the Import One-Stop-Shop (IOSS) system will be introduced.
To obtain a unique IOSS identification number, sellers will need to register with the IOSS of one of the EU countries. This number will be shown on all parcels sent to the EU and will ensure fast customs clearance.
3. Marketplaces will monitor compliance with tax legislation in the field of VAT.
Today, online entrepreneurs who use marketplaces are obliged to independently calculate their tax liabilities for VAT and pay taxes. In accordance with the new VAT rules, it is planned to impose on digital trading platforms, in some cases, the duties of tax agents to collect and pay VAT from buyers.
The above is for informative purposes only. Further professional advice should be sought for each particular case. Our firm does not accept any responsibility for any loss or damage occurring by acting on the basis of this information.