On December 5, 2017, the Council adopted the VAT package on electronic commerce which included a directive and two regulations. Furthermore, on November 21, 2019, the Council adopted implementing measures for the VAT package by Council Directive (EU) 2019/1995 and Council Implementing Regulation (EU) 2019/2026.
Finally, on February 12, 2020, the Commission finalized the reform by adopting Implementing Regulation (EU) 2020/194 laying down the procedures for the operation of the VAT single window.
All of these significant changes were to entry into force on January 1, 2021. However, due to the COVID-19 crisis, the European Commission decided to postpone the entry into force of the reforms until July 1, 2021.
First, with regard to intra-Community sales, the new e-commerce package introduces two major provisions:
- new rules allowing the companies concerned to fulfill all their VAT obligations in the EU using an online digital portal, hosted by their own tax authorities. These rules already exist for online sellers of electronic services (the MOSS one-stop shop) and they will be extended to distance selling by transforming MOSS into a one-stop shop (OSS);
- the current thresholds specific to each Member State (from € 35,000 to € 100,000) will be replaced by a common threshold at European level, namely by a single annual VAT threshold of € 10,000 below which cross-border sales to other countries within the EU are treated as domestic sales for online businesses, which pay VAT to the tax authorities on which they depend. Sales made by companies crossing this threshold will be subject to the rates applicable in the Member State of destination. Those who exceed the threshold no longer have to register with the tax authorities of each Member State as before, because they can use the one-stop shop.
Furthermore, with regard to distance sales of goods imported from third countries, two major provisions are provided for:
- the abolition of the VAT exemption in force for imports of small consignments with a maximum value of € 22 from third countries; a new special scheme for distance sales of goods imported from third territories or third countries of an intrinsic value not exceeding EUR 150 will be created and is referred to as the Import One Stop Shop (IOSS);
- simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 will be introduced, in case the IOSS is not used (special arrangements);
- special provisions will be introduced whereby a business facilitating supplies through the use of an online electronic interface is deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”); thus large online market sites will assume responsibility for the collection of VAT on sales made on their platforms by companies from third countries to consumers in the EU. Sales processed through these electronic markets will be mainly processed at the rates of the Member State of destination.
On 30 September 2020, the Commission published Explanatory Notes on the new VAT e-commerce rules. They contain extensive explanations and clarifications on these new rules including practical examples on how to apply the rules if you are a supplier or an electronic interface (e.g. marketplace, platform) involved in e-commerce transactions. These Explanatory Notes are now available in all official EU languages, as well as in Chinese.
As a result, the following transactions will be covered by the new provisions:
- Distance sales of goods imported from third territories or third countries carried out by suppliers and deemed suppliers, except for goods subject to excise duties;
- Intra-Community distance sales of goods carried out by suppliers or deemed suppliers;
- Domestic sales of goods by deemed suppliers ;
- Supplies of services by taxable persons not established within the EU or by taxable persons established within the EU but not in the Member State of consumption to non-taxable persons (final consumers).
Finally, since April 1st the pre-registration in the One Stop Shops (OSS/IOSS) is available in each Member State. Businesses willing to make use of these new schemes are invited to register. The guide to the VAT One Stop Shop (OSS) explaining in detail how to register, declare and pay VAT via the OSS/IOSS is also available in English.
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