New VAT rules apply from 1 July for B2C transactions
The new EU VAT e-commerce rules that become effective in Spain on 1 July 2021 include major changes to the current VAT distance selling regime that will affect supplies of goods by businesses to private consumers (B2C) within the EU. The new rules will ensure that VAT is paid on all taxable sales, as they will impact online sellers, digital platforms and other businesses that sell their products through online platforms. These VAT rules originally were to apply as from 1 January 2021, but implementation was postponed as a result of the COVID-19 pandemic, giving EU member states and businesses additional time to prepare. Spain has transposed the new EU rules into its domestic law. Under Spain’s current legislation, sellers in B2C transactions must charge VAT at the rate applicable in the country from which the goods are dispatched until the seller’s annual sales exceed EUR 35,000. Once the sales threshold is exceeded, the seller must register for VAT purposes in the country where the customer is located and charge VAT at the rate applicable in that country. This will change on 1 July.
The new e-commerce scheme will simplify VAT obligations and will allow certain businesses to register for the One-Stop Shop (OSS) or the Import One-Stop Shop (IOSS), and report and remit VAT due on a single EU VAT return on a quarterly or monthly basis, respectively. The tax authorities will be responsible for distributing the VAT to each EU member state concerned.
The most important aspect of the new VAT e-commerce rules in Spain are as follows:
- Abolition of the EUR 35,000 threshold for distance sales: The current distance sales thresholds (EUR 35,000 in Spain and up to EUR 100,000 or the EUR equivalent in other EU member states) will be replaced by a single EUR 10,000 threshold. For example, non-EU businesses making B2C supplies to Spanish customers will have to charge Spanish VAT if their sales turnover in the current calendar year exceeds EUR 10,000 (below this threshold, distance sales can be reported in the country of the provider).
- Elimination of multiple EU VAT registrations requirement: The obligation for a seller to register in each EU member state in which it makes supplies will be eliminated, and VAT on distance sales will be able to be paid by submitting the corresponding VAT return in the country in which the seller is established. The tax authorities of that member state will be responsible for collecting the VAT of each EU member state.
- Extension of the OSS scheme: The OSS—which allows sellers to register for VAT in a single EU member state—will be extended to apply to companies carrying out online distance sales of goods, intra-EU and non-EU supplies of all types of B2C services located in the EU, and supplies made via online marketplace platforms.
- Elimination of the VAT import exemption for small consignments: The VAT import exemption for consignments with a unit value up to EUR 22 will be replaced by an import VAT exemption for consignments with a value not exceeding EUR 150 where the sales are declared via the IOSS. Registration in IOSS is not mandatory for sellers, but if a seller elects not to register, the imports will be subject to VAT.
- Introduction of “deemed supplier” status for online marketplaces: Online marketplaces that facilitate sales will become responsible for collecting VAT on distance sales of goods imported from third countries to private EU consumers. In cases where the value of the imports does not exceed EUR 150, the marketplace will be responsible for charging Spanish VAT rather than the VAT of the seller.
Impact of the new rules
Companies making online sales to private consumers in Spain should carefully analyse their situations and be prepared for possible new compliance obligations. If the company applies for VAT registration in Spain, it will be possible to settle the VAT charge in each EU member state related to distance sales, thus simplifying compliance.