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Distance sales in hard Brexit context

Broadly understood e-commerce industry may suffer from consequences of hard Brexit.

The exit of Great Britain from the EU without an agreement may affect online operating traders. This stems from the special taxation rules for these types of  transactions.

As a general rule, distance sales of goods dispatched or transported by a taxpayer from the territory of a given Member State to the territory of another Member State (which is the country of destination for the shipped or transported goods and vice versa) is deemed to be mail order, provided that the delivery is made to the consumer, who is not a VAT taxpayer or indeed a VAT taxpayer not obliged to settle intra-Community acquisition of goods.

At this point, it is imperative to take into account the requirement pertaining to transport / shipping of goods from one EU country to another. This condition will not be met after the UK leaves the EU.

Generally the place of taxation of such transactions is the place of delivery on the territory of an EU country. However, entrepreneurs may, within the scope of the applicable limits set by individual Member States, choose the EU country from which the goods are issued as the designated place of taxation.

Limits can be found here

However, after exceeding the thresholds, entrepreneurs have to settle VAT in the country of delivery, which involves the need to register in a given Member State. In the case of entrepreneurs based in the EU, this is associated with the only requirement to register for VAT purposes, but in the case of sellers from outside the EU, in some countries, for example in Poland, there is also an obligation to establish a tax representative. That is why in order to minimize the undesirable effects of the UK bargaining agreement with the EU on its exit from the EU, retailers, especially from Great Britain, may pre-emptively seek to establish a tax representative.

When the UK leaves the EU without agreement, sales from its territory to the EU and vice versa will be treated respectively as import or export of goods. Consequently all  customs formalities would need to be satisfied. In addition, if British entities sell from EU territory to third countries, they will be required to obtain the so-called EORI number, the number given by Great Britain will be invalid.

Situation may be improved by changing the regulations on distance sales of goods adopted with Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112 / EC and Directive 2009/132 / EC in respect of certain obligations arising from value added tax in the case of providing services and selling goods at a distance. From 1st January  2021, the Mini One-Stop Shop (MOSS) system will be extended to include distance sales of goods and thus transforming into a One-Stop Shop (OSS). The extension of the OSS system will pertain to not only intra-EU sales, but also goods imported from third countries with parcel value of max 150 Euro. For intra-EU trade, this procedure will not, in principle, be different from the current procedures for electronic services. However, it will be different in the case of distance sales of goods imported from third countries.  Up until now, such sales was not identified as distance sales within the meaning of Directive 112/2006, but treated simply as  import of goods. The European Commission, in order to assist companies and combat VAT fraud , decided, under certain conditions, to include the sale of goods imported from third countries in the OSS system. This procedure will require notification in one of the EU countries of the so-called country of identification. The country of identification will be determined according to criteria set out in the Directive. This state will give the identification number. VAT returns containing information on mail order sales within the EU will be submitted in the country of identification.


Gerard Goliasz

Tax Specialist

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