Important provisions of the EU e-commerce VAT package take effect from July 2021. Businesses selling goods to customers in the EU may need to update their VAT compliance procedures. The new provisions include an expansion of the MOSS, an end to VAT exemptions on low value imports and new VAT obligations for online marketplaces.
According to the European Commission, the purpose of the e-commerce VAT package is to “facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses”.
Here are the major reforms.
An expanded One Stop Shop
The Mini One Stop Shop (MOSS) was introduced to simplify VAT compliance for businesses conducting cross-border sales. The MOSS enabled businesses selling digital services to register for VAT in a single EU jurisdiction. Previously, they had to register in every EU country in which they met the relevant sales threshold.
The EU e-commerce VAT package extends the Mini One Stop Shop into an OSS, enabling a single VAT return for distance selling to B2C customers throughout Europe.
From 1 July 2021, many e-commerce sellers will have the option of filing via the OSS. Consequently, they will no longer need to file multiple VAT returns.
Online marketplaces will be responsible for VAT
Under defined conditions, authorities will define businesses running digital platforms or online marketplaces as the supplier of goods sold to customers in the EU for the purposes of VAT. Consequently, they must charge and collect VAT on those sales.
Businesses running an online marketplace that sells goods to customers in the EU therefore should seek full clarity on their VAT compliance obligations.
No more exemption on low-value goods
From 1 July 2021, the VAT exemption on small packages valued under €22 will no longer apply. Instead, an import scheme will now apply for goods up to the value of €150.
Under the new scheme, the seller must charge and collect VAT at the point of sale. As a result, relevant goods will now be exempt from VAT at the border, which should facilitate faster release from customs.
Ensure optimal VAT compliance
Vatglobal is carefully monitoring the evolution of EU e-commerce VAT policy. Our team is available to provide expert guidance on adapting to new regulations. Our proprietary VAT compliance technology makes the complex problem of e-commerce VAT compliance simple.