From 1 July 2021, the rules on VAT for cross-border business-to-consumer (B2C) e-commerce will change in the EU. A change that will not go unnoticed for our customers or branch colleagues in the European Union.
The purpose of this change is to overcome the barriers of online sales over borders and reduce the challenges arising from the VAT regimes for distance sales. With the new One Stop Shop system E-commerce businesses can register in one EU member state, and it will be valid for the declaration and payment of VAT on all distance sales of cross-border products to customers within the EU instead of having multiple VAT registrations across the EU.
This will simplify the VAT reporting process with the use of a different One Stop Shop reporting system to declare all cross-border B2C transactions.
VAT reporting under these new rules will be simplified through the use of different One Stop Shop reporting systems to declare all cross-border B2C sales through a tax portal in one Member State. This also means that the existing limitation for distance sales of goods within the EU will be abolished and replaced with a new limit of EUR 10,000. Below this limit, the services and distance sales of goods within the EU remain subject to VAT in the Member State where the taxable person is established.
What is the IOSS for?
The IOSS (Import One Stop Shop) facilitates the collection, declaration and payment of VAT for sellers who make distance sales of imported goods to buyers in the EU. IOSS also facilitates the process for the buyer, who is only charged at the time of purchase and therefore does not face any surprising fees when the goods are delivered. If the seller is not registered in IOSS, the buyer must pay VAT and usually a customs fee charged by the carrier.
What are the benefits of this?
It simplifies things for consumers, knowing that when buying goods online from outside or inside the EU, the VAT rate applied is the same as for goods acquired in their home country. The new rules ensure that the VAT is paid where the consumption of goods takes place.
The environment for e-commerce business within the EU will be simplified and fairer and one can overcome the barriers to cross-border online sales which increases the ability to grow. This also means that businesses within the EU will land on even footing with businesses in third territories.
With increased VAT payments and less VAT fraud the citizens of the member states benefit from the public revenues increasing.
- A common turnover threshold is introduced within the EU for distance selling of goods and sales of telecommunications services, radio and television broadcasting and electronic services (hereinafter electronic services).
- Inner union distance sales of goods and sales of services to non-taxable persons who are to be taxed in another EU country can be reported according to the special arrangements. In the OSS platform, you can report and pay VAT according to the special arrangements.
- The VAT exemption that previously existed for imports into the EU of goods with a lower value (EUR 22) is removed.
- A new system is introduced for reporting distance selling of certain lower value goods (EUR 150) imported into the EU.
- So-called platform companies, which through the use of electronic interfaces make it possible to sell goods, may be required to report and pay VAT for sales via the platform.
For more information about the new rules, how to register for the OSS platform and all regulations, visit the European Commission. You can also read the EU’s “Explanatory Notes on VAT e-commerce rules” (PDF).