The common Value Added Tax (VAT) system plays a fundamental role in the Digital Single Market. It is included in the first pillar—Access—of the European strategy, which targets a better access for consumers and business to digital goods and services across Europe.
On December 5, 2017, the European Council adopted the VAT e-commerce package, consisting of the Council Directive (EU) 2017/2455, Council Regulation (EU) 2017/2454 and Council Implementing Regulation (EU) 2017/2459.
The VAT e-commerce package aims to simplify VAT obligations for companies carrying out cross-border trades of goods and services to non-business consumers, preventing VAT fraud and keeping pace with today's digital economy.
The new rules will facilitate grater cross-border trades through a reduction in VAT compliance costs and will enable EU companies to be more competitive in the European landscape, also with reference to non-EU businesses that are currently not charging VAT. The VAT e-commerce package, among others, includes:
1. Improvements to the current Mini One Stop Shop regime (MOSS) already in place since 2015 for the so called "business to consumer" (B2C) transactions. In particular, the simplifications to the MOSS includes the introduction of two thresholds, suggesting reduced administrative burdens for small enterprises that render cross-border services only occasionally:
- The first threshold, an annual turnover of €10,000 of TBE supplies, below which the selling company is allowed to charge its home country's local VAT;
- The second threshold, an annual turnover of €100,000, below which the supplier benefits of a reduced burden regarding the evidence in order to identify the member state of the customer.
In addition to the above, some relief was introduced in relation to invoicing rules. Indeed, the rules of the EU country of the supplier are applicable instead of those of the state of the customer.
EU member states shall apply the abovementioned novelties as of January 1 of this year.
2. The extension of the MOSS regime to:
- B2C supplies of services other than telecommunication, broadcasting and electronic (TBE);
- Intra-Community distance sales of goods and
- Distance sales of goods imported from outside the European Union or for sales made within EU borders by non-EU vendors.
For the above purposes, the scheme utilized for intra-Community supplies of TBE services will be extended to all B2C transactions, either supply of services or distance sales of goods. Today B2C cross-border supplies of goods are regulated by a special regime, which allows the application of the supplier's home country VAT only if the annual intra-Community sales fall into a range between €35,000 and €100.000, depending on the legislation of the single countries. Above this threshold, the supplier must appoint a representative in the country of the consumer, charging local VAT and fulfilling all the tax obligations required in that member state.
With the new rules, businesses will benefit from a reduction in tax compliance, thus lowering their operating costs. A company will be able to declare all its cross-border B2C sales in its own State of residence, which, in turn, will communicate the relevant information and transfer the VAT collected to the other member states.
Another important novelty will cover distance sales of goods with value up to €150, imported from non-European countries. Different from today, the seller will have to charge and collect VAT through an intermediary appointed within the EU or via logistic intermediaries.
EU member states shall apply this provision from 2021.
3. Special provisions applicable to electronic interfaces that facilitates supplies of goods. The last provision adopted by the European Council will regard businesses operating electronic interfaces such as marketplaces. Under some circumstances, they will be deemed for VAT purposes to be the supplier of the goods sold to EU customers and will have to collect and pay VAT on these sales. With reference to this point, the European Commission, on December 11, 2018, published a proposal to amend the VAT rules, with the purpose to provide deeper details on when an electronic interface will be considered liable for VAT. EU Member States shall apply also this provision from 2021.
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