The EU VAT rules related to distance sales of goods were recently further explained through an amendment of the VAT Directive and VAT Implementing Regulation. In this article we discuss some of the key changes.
As of 1 January 2021, all supplies of goods to EU private consumers will be subject to VAT in the EU Member State where the goods arrive. This rule will also apply to supplies of goods from outside the EU. When goods are imported into the EU, a supplier can apply two simplifications on goods whose intrinsic value is EU 150 or less.
As well, the simplification applicable to postal carriers has been further explained. With respect to the application of monthly payment of import VAT under this simplification, EU Member States can use the rules that apply to deferred payments of customs duties.
Digital platforms have an important role within the world of e-commerce. As of 1 January 2021, instead of the actual supplier, a digital platform can be deemed to supply goods to a consumer. VAT due on cross-border supplies of goods that needs to be reported in the EU Member State where the goods arrive can be reported in one EU Member State (One Stop Shop system/OSS). The OSS does not normally allow reporting of local supplies. However, for a digital platform that facilitates supplies of goods within the EU, it will be possible to use the OSS when the supply of goods is a local supply.
By using the OSS, the VAT due on cross-border supplies of goods can be reported in one EU Member State. As of 1 January 2021, corrections to returns after they have been submitted will have to be made by an adjustment in a subsequent VAT return. However, the new rules contain a transitional arrangement. Corrections relating to periods up to and including the last return period in 2020 shall, after the submission of a VAT return, be made only by an amendment of that return. Corrections relating to periods from the first return period in 2021 shall, after the submission of a VAT return, be made only by an adjustment in a subsequent return. The amendments will have to be submitted electronically to the EU Member State of identification within three years of the date on which the initial return was required to be submitted. Corrections to the final VAT return and previous VAT returns arising after the submission of the final VAT return shall be discharged directly with the tax authorities of the EU Member State of consumption when the taxpayer:
No longer uses the OSS;
Is excluded from the OSS; or
Clearly, the new VAT rules are intended to make the collection of VAT simpler and more efficient. As well, they help create a level playing field for supplies of goods coming from outside the EU and goods supplied within the EU. Therefore, we welcome these new VAT e-commerce rules. But, given that at this point, not all VAT e-commerce rules are clear, taxpayers should exercise caution and seek professional advice.