The popularity of e-commerce is undoubted. According to Eurostat data, by the end of 2020, 64% of Europeans between the ages of 16 and 74 have made an online purchase in the last twelve months. Clothing, shoes, and accessories are some of the most successful categories for e-commerce.
In response to this expansive use of e-commerce, the European Commission has outlined conditions for collecting taxes from such transactions within the European Union, with the aims of both smoothing the management process and curbing tax avoidance. EU VAT regulations have been amended specifically for e-commerce and online stores.
From 1 July 2021 the new VAT rules will enter into force, affecting services, intra-Community distance sales, imports of low-value goods and certain internal deliveries in the field of electronic commerce.
These new rules aim to regulate electronic trade in goods and services between undertakings and individuals in the European Union (B2C : Business to Consumer).
(Note: In Spain, this change will come at the expense of the posting in the BOE (Official State Gazette) of the rules transposing Community regulation.)
What are the changes?
The most important changes are:
- The use of the one stop shop (will be extended to intra-Community distance sales and certain domestic deliveries.
- The thresholds currently in place for sales of remote goods within the EU are replaced by a maximum limit of EUR 10,000 – after which remote sales items will be taxed in the State of destination of the goods. VAT must then be re-issued from the Member State where the buyer is located.
- In order to declare and enter VAT due in these transactions, the taxable person may register with the OSS Register in an EU Member State through the “single window” scheme (VU). Here, sellers can see, declare and pay the amounts of VAT corresponding to all remote sales of goods and services or cross-border services to final consumer customers within the EU, thus ensuring compliance with tax obligations for the declaration and entry of the tax in a single Member State.
- If the threshold of EUR 10,000 is not exceeded, the services (telecommunications, broadcasting and electronics, or TBE) and sales of goods at a distance within the EU may continue to be subject to VAT from the Member State of the seller or service
- VAT exemption on the importation of small shipments (>EUR 22 value) will be eliminated. Therefore, VAT on small shipments must be paid at the rate applicable in each EU Member State, which will affect the price and margin of these products.
For VAT purposes, it will be as if the owners of any digital interface which facilitates certain deliveries of goods (markets, portals, online platforms such as Amazon & eBay, etc.), have received and delivered the goods themselves.
- Remote sales of goods imported from third countries in shipments where the total worth does not exceed EUR 150. For these cases, a new Import One Stop Shop (IOSS) platform has been created.
- Remote sales within the European Union by un-established suppliers.
- To ease compliance with declaration and entry obligations, a special optional regime is established for distance sales of goods imported from third countries to EU individuals (>EUR 150), which will allow sellers to declare and enter VAT on their sales through the new “single import window” system (IOSS) or Single Import Window (VUI).
These amendments ensure consumers pay the same rate of VAT as applicable in their country of origin. Further, EU companies will see reduced administrative burdens and VAT management costs, competition between intra-Community and third-country suppliers will be protected, and member countries will benefit from the reduction of VAT fraud in electronic commerce by ensuring that VAT is paid at the place of consumption of the goods.
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