Indirect Tax News - December 2020

European Commission publishes Explanatory Notes on the new VAT e-commerce rules

Significant aspects of the VAT rules for international trade related to e-commerce will change as of 1 July 2021. Recently, the European Commission published the Explanatory Notes on VAT e-commerce rules. In this article we will discuss the main changes.

E-commerce supplies of goods within the EU

As of 1 July 2021, taxable persons supplying goods to private persons in another EU Member State have to deal with distance selling rules when the goods are transported by, or on behalf of, the supplier or when the supplier indirectly intervenes in the transport. The threshold for application of the distance selling rules will be abolished. When the distance selling rules apply, the taxable person must pay VAT in the EU Member State where the good arrive instead of in the EU Member State from which the goods departed. As well, the filing of VAT returns will be simplified. Taxable persons can opt to file an OSS-return (One Stop Shop-return) in one EU Member State (for EU businesses this will be their own EU Member State). For small entrepreneurs, further simplifications apply. When certain conditions are met, small entrepreneurs can charge VAT on their distance sales in the EU Member State where the goods depart from.

E-commerce supplies of goods from outside the EU

As of 1 July 2021, all supplies of goods to EU private consumers will be subject to VAT in the EU. This will also apply to supplies of goods from outside the EU. The exemption for import VAT for small consignments is being abolished. Import VAT will be due on every importation. For goods imported into the EU, two potential simplifications may apply for goods with an intrinsic value of no more than EUR 150. The first one provides for an exemption upon importation combined with a single VAT return to report VAT on the supplies subject to VAT in the EU Member State of the consumer. If the first simplification is not used a simplification intended for postal carriers can be applied. Under this simplification the payment of VAT on importation can be deferred until the 16th of the month following the month in which the VAT was collected.

E-commerce and the VAT position of platforms

Under a new rule that applies as of 1 July 2021, an e-commerce platform can be deemed to supply goods to a consumer instead of the actual supplier. The deemed supplier provision will only apply where the platform facilitates the underlying supply of goods. Furthermore, under the new VAT e-commerce rules, the VAT due on EU cross-border supplies of goods and local supplies can be reported in one EU Member State by the e-commerce platforms by filing an OSS-return.

Practical consequences

The upcoming VAT rules related to e-commerce are complex. It’s important for all taxpayers to think about the consequences of the VAT e-commerce rules and to determine how they will impact their situation.

Madeleine Merkx

Anne Janssen