The e-commerce VAT package is due to come into force today, 1 July 2021.
The changes contained in the package will have a significant impact for any business selling goods and/or services to consumers (i.e. private individuals and non-VAT registered persons) across the EU. The changes also affect marketplaces and platforms facilitating such sales where the value of goods is below €150.
B2C services
EU distance sales
As a reminder, the VAT package removes existing "distance sales" thresholds. Once the value of all goods (and certain services) sold to consumers in other EU Member States in the previous 12 months reaches €10,000, the business will need to account for VAT at the rate applicable in the country where the delivery of the goods ends. Consequently, many businesses selling goods to consumers in multiple EU countries where those values are relatively low, may now find themselves liable to VAT in all EU countries where their customers reside.
All businesses engaged in distance sales should review the level of goods dispatched to EU consumers in the past 12 months and consider if they need to charge local VAT as of 1 July 2021.
In order to avoid multiple VAT registrations, the business may register under the new Union-OSS scheme. The scheme is available to EU and non-EU businesses and marketplaces who are engaged in EU distance sales (which includes goods shipped to/from Northern Ireland but exclude the rest of the UK). EU businesses should register with the tax authorities where they are established while the non-EU traders need to seek registration in the EU Member State from which the goods are shipped to consumers.
The main benefits of using Union-OSS include a single simplified quarterly return and single VAT payment. Where the business is already registered in some EU Member States it may consider de-registration and apply to use Union-OSS.
Import distance sales
The package also removes VAT exemption applicable to goods imported into the EU of a value not exceeding €22. All goods brought into the EU will now be subject to import VAT regardless of their value. The concept of "import distance sales" applying to goods shipped directly from outside the EU to EU consumers, is also introduced.
Business who engage in import distance sales will now need to charge VAT on the sale of these goods at the rate applicable in the country of the consumer. They can avoid multiple registrations by applying for a single VAT registration under Import-OSS ("I-OSS"). When the scheme is used, the business will be exempt from import VAT and will only need to file a single monthly return in respect of all sales made to EU consumers.
The scheme can be used by EU and non-EU businesses as well as marketplaces. However, a non-EU business will need to appoint an EU established intermediary to use I-OSS.
Appointment of an Intermediary
Marketplaces
New obligations will apply to marketplaces and other electronic interfaces that "facilitate" the supplies of goods to EU consumers, i.e. enable consumers to purchase goods through an electronic interface. Marketplaces will be deemed to purchase and sell the goods themselves. These deeming provisions will apply to EU distance sales where the vendor is a non-EU resident and to imported distance sales of goods below €150.
Marketplaces can register under Union-OSS (to account for VAT on EU distance sales) and/or I-OSS (to account for VAT on imported distance sales).
Summary
The OSS schemes are optional but considering the administrative burden that multiple registrations can pose – multiple returns in different languages, invoicing obligations, different taxable periods – they are likely to simplify the overall VAT compliance required of businesses. However, some businesses may need to register for multiple OSS schemes when they are engaged in different types of supplies to EU consumers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
