2021 EU VAT for e-commerce
As of 1 January 2021, new VAT rules for e-commerce will apply and will have a big impact on all businesses involved. This VAT e-commerce reform aims to combat VAT fraud, facilitate cross-border trade, and ensure fair competition for EU businesses.
The European Union face some challenges when collecting the correct amount of VAT on goods traded via the internet. The EU wants to modernize and also simplify the VAT system for the online sale of goods.
New rules to simplify VAT collection
Below are some of the new rules that will be introduced to simplify the current process:
- Improvements to Mini One Stop Shop (MOSS):
- The new rules will include an extension of the MOSS as of 2021, other (non-digital) B2C services and B2C supplies of goods, “distance sales”, will also fall in scope of MOSS
- 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
- Extension to the scope of MOSS, turning it to a One Stop Shop (OSS):
- Intra EU distance sales of goods
- B2C supplies of services other than TBE services
- Distance sale of goods imported from third countries and third territories in consignments of an intrinsic value of minimum EUR 150
- Certain domestic supplies of goods facilitated by electronic interfaces
The reform will allow companies to centralise their VAT reporting in a single EU country, via a new VAT number specific to each OSS.
Businesses selling online to European consumers
All EU and non-EU businesses selling goods and services online to European consumers will be affected by the VAT reform, regardless of the sales, channel they use:
- Marketplaces – eBay, AliExpress etc.
- Social Networks – Facebook, Instagram etc.
Before 2021, online businesses selling into the EU should check the extent to which they will be affected by the new rules for e-commerce.