Online marketplaces, such as Amazon, eBay or Cdiscount will be considered as the deemed supplier for some transactions in the EU, and, as a result, will be liable for collecting and remitting VAT on those sales. This change is a part of the July 2021 EU VAT reform. Up to now, it was the seller who was responsible for VAT, but the European Commission sees marketplaces as better equipped to handle VAT—and also, easier to control.
In this article, we’ll look into the specific changes and how they affect marketplace operators.
For which transactions do marketplaces need to collect VAT?
Marketplaces might be liable for VAT if they’re facilitating the sale. If that’s the case, they become the deemed supplier.
For this, the marketplace needs to define the terms and conditions of the sale, authorize the charge to the end customer, or handle the delivery of the goods. If any of these three conditions are met, the marketplace is the deemed supplier.
They then become liable for charging and remitting VAT in the following two instances:
- For cross-border and domestic transactions between non-EU sellers and EU buyers (i.e. when goods are stored on the territory of the EU)
- For imported goods of a value of less than €150, for both EU and non-EU sellers.
If the marketplace is liable for VAT, how are transactions carried out?
- The marketplace purchases the goods from the supplier, which is a B2B transaction
- The marketplace then sells the goods to the end customer, which is a B2C transaction on which the marketplace charges VAT.
In practice, the two transactions are not carried out separately, but they are considered as a separate purchase and sale for the purposes of VAT collection.
Let’s now look at the invoicing requirements for each part:
Part 1: Supply from the seller to the online marketplace
Here, there are two possibilities:
- Imported products: With an import B2B transaction (as in this case), the supply is VAT-exempt.
- Supply of products by a non-EU seller from an inventory located in the EU: The seller needs to issue an invoice to the marketplace. Self-billing arrangements between the supplier and the marketplace are possible for this scenario.
Part 2: Supply from the marketplace to the end customer
Again, there are two possibilities:
- Imported products: Here, we have an import B2C transaction. The marketplace applies and collects VAT according to the VAT rules of the destination country. Issues are not mandatory in the EU as a whole, but some countries require them even for B2C transactions like this one.
- Supply of products by a non-EU seller from an inventory located in the EU:
- If the sale is domestic (i.e. within the same country, for example the inventory is located in France and the end customer is located in France), the marketplace doesn’t need to issue an invoice, unless the country requires it.
- For intra-community cross-border transactions (f.e. from a Spanish inventory to a French end customer), again, the marketplace doesn’t need to issue an invoice.
The UK is currently applying similar rules for online marketplaces since January 1, 2021.