Online sellers prepare for new E-Commerce VAT rules from 1 July 2021
New E-commerce VAT rules from July
These amendments will significantly change the way VAT operates for cross-border business-to-consumer (B2C) e-commerce activities in the European Union (EU).
The main changes that will enter into force from 1 July 2021 are as follows:
- Extension of the VAT Mini One Stop Shop (MOSS) to a One Stop Shop (OSS)
- The treatment of Online Marketplaces and Platforms as deemed suppliers for certain transactions
- Introduction of a new Import One Stop Shop (IOSS)
- Introduction of Special Arrangements for certain imports of goods.
As we know, OSS is an extension of the current MOSS. This simplifies the VAT obligations for businesses selling their goods and services to consumers in the EU.
The IOSS will report distance sales of goods imported from outside the EU.
EU suppliers are required to register under the OSS/IOSS regime in the Member State where they are established. Non-EU suppliers of services may register under the non-Union OSS regime in any Member State and under the Union scheme for intra-community distance sale of goods in the Member state of dispatch.
For IOSS, a non-EU established supplier must register for this indirectly through the appointment of an intermediary (unless the non-EU supplier is established in a country where the EU has a VAT mutual assistance agreement in place). If an intermediary is appointed, registration will be done in the Member State of establishment of the intermediary. If no intermediary is appointed, registration will be done in the Member State of choice.
Pre-registration for the various schemes is available from 1st April 2021.
EU Commission Explanation:
The EU Commission provides the following summary table to explain the different schemes and what they are used for. The Non-Union and Union scheme refers to the OSS, while the import scheme is the IOSS:
|Non-Union Scheme||Union Scheme||Union Scheme|
|Taxable person established in the EU||Cannot use this scheme||B2C suppliers of services in the EU Intra-Community distance sales of goods||Distance sales of import goods in consignments not exceeding €150|
|Taxable persons not established in the EU||B2C suppliers of services in the EU||Intra-Community distance sales of goods||Distance sales of import goods in consignments not exceeding €150|
So when is an intermediary obligatory?
|Transactions||Special scheme||Need for intermediary or tax representative||Special scheme||Need for intermediary or tax representative|
|Supplies of B2C services||Non-Union scheme (OSS)||NO||Union scheme (OSS)||NO|
|Intra-Community distance sales of goods||Union scheme (OSS)||NO||Union scheme (OSS)||NO|
|Domestic supplies by EI||Union scheme (OSS)||NO||Union scheme (OSS)||NO|
|Distance sales of imported goods from third countries or third territories in consignment not exceeding €150||Import scheme (IOSS)||YES||Import scheme (IOSS)||NO|
An intermediary is only needed if you use the IOSS and the goods are imported from an non-EU country that doesn’t have a mutual assistance agreement with the EU.
Concept of deemed supplier
New rules are being introduced for online marketplaces and platforms facilitating supplies of goods in the EU. Where online marketplaces or platforms are facilitating certain supplies of goods, they will be deemed to be making the supplies themselves. As such, the online marketplace or platform will be responsible for accounting for the VAT on those supplies. This means that the supply of goods from an underlying supplier to an end customer, through an online marketplace or platform, will be artificially split into two supplies:
- A supply from the underlying supplier to the online marketplace or platform and
- A supply from that online marketplace or platform to the customer.
An online marketplace or platform will be deemed to be making the supplies when they facilitate the following transactions:
- The importation of goods from outside the EU in consignments of an intrinsic value not exceeding €150 regardless of where the underlying supplier is established and/or
- Intra-EU distance sales of goods and domestic supplies of goods, regardless of the value of the goods, but where the underlying supplier is established outside of the EU.
Where an online marketplace or platform is deemed to be making supplies of goods, they will be treated as any other supplier of goods. The online marketplace or platform can therefore opt to register to apply the Union scheme or the IOSS or both, depending on the supplies they are making. The rules of those schemes will apply in the same way to that online marketplace or platform as they will to other suppliers using those schemes.
Who is affected by this New VAT Reform?
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.
Dedicated websites, marketplaces and social networks. Drop-shipping players, who have so far been relatively unconcerned, will be particularly impacted by the changes as of 1st January 2021.
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