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Changes in e-commerce VAT from 2021

Directive 2017/2455 obliges EU member states to introduce changes in e-commerce.

Who will be affected by these changes?

  • Online sellers of goods
  • Remote service providers

From when?

The new regulations will enter into force from 2021.

How will the regulations change?

An economic operator that sells goods online or provides services to consumers and exceeds the annual turnover threshold of €10,000 will have to account for VAT in a new way.

The new rules will require online traders and service providers to register with the equivalent of today’s MOSS (which already covers major providers of electronic, broadcasting and telecommunications services) and submit quarterly tax returns showing the value of their sales in each EU country. The tax on such transactions will be paid at the VAT rates applicable in the consumer’s country.

Online sellers of low-value goods (below €150) previously imported from outside the EU will also have to register in VAT-OSS.

Distance sales of goods imported from third countries.

Basically, that procedure will not differ substantially from the current procedure for electronic services for intra-EU trade. However, it will be different for distance sales of goods imported from third countries. So far, those sales have not been identified at all as distance sales within the meaning of Directive 112/2006, but are recognized as standard import of goods. To meet businesses’ demands and fight against unfair practices in the trade in goods, the European Commission has decided to extend the OSS system under certain conditions to sales of goods imported from third countries. That procedure will require a declaration to be made in an EU country, known as the member state of identification. The member state of identification will be determined according to the criteria set out in the directive. The member state of identification will assign an identification number. In the member state of identification, taxpayers will submit VAT returns containing information on distance sales within the EU.

The tax on goods from third countries will be charged by online shops or trading platforms where the goods are sold. Traders of low-value goods from third countries will have to register on the EU-OSS platform, but unlike traders of EU goods, they will submit returns for monthly periods.

All registered traders will have to keep records of sales for 10 years.

Will it be necessary to appoint an intermediary?

Operators established outside the EU will have to appoint an intermediary to apply the simplified procedure. According to the amended directive, an intermediary is “a person established in the Community by the taxable person carrying out distance sales of goods imported from third territories or third countries as the person liable for payment of the VAT and to fulfil the obligations laid down in this special scheme in the name and on behalf of the taxable person.”

Change and Brexit

The UK left the EU on 31 January 2020. Under the opt-out agreement, the UK will leave the EU VAT system by 31 December 2020. That means that UK sellers will be sellers from outside the EU. If the transitional period is not extended, it will lapse at the same time as introduction of the e-commerce reform. Sellers who are residents of the UK will have to register in an EU country to be able to use the new OSS system.

Gerard Goliasz
TAX Specialist

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