After July 1, 2021, the VAT rules for B2C sales in the European Union will change. The new VAT package will affect marketplaces, sellers of goods and services and postal couriers.
At the moment, sellers need to register in multiple EU countries and collect VAT separately, or use the optional Mini One-Stop-Shop (MOSS) scheme for digital, broadcast and telecom services (Under the MOSS scheme, they’re able to declare VAT in a single EU country). Additionally, products imported from outside of the EU and that cost less than €22 are exempt from VAT.
The new rules of the EU VAT package have a few objectives. They aim to simplify trade within the EU, improve VAT compliance and reduce fraud, and guarantee the fairness of competition for EU suppliers.
What Changes Under the New EU VAT Rules?
After July 1, 2021, a new VAT scheme called One-Stop-Shop (OSS) will be introduced as a part of the EU 2021 VAT package. It will further simplify tax reporting and compliance for B2C sellers who provide goods or services to customers in the EU. In their OSS VAT return, they’ll be able to declare all their sales transactions to EU customers.
The current distance selling threshold rules will no longer apply; instead, a EU-wide threshold of €10,000 will be introduced. Under this threshold, B2C goods will be subject to the VAT rules of the member state from which they are dispatched, and above it, of the destination member state.
Goods imported to the EU of a value of less than €22 will no longer be VAT-exempt
Instead, imported products up to €150 will be covered by a single report scheme, called the Import One-Stop-Shop (IOSS). Postal operators or courier firms will be able to collect VAT on imported goods from consumers via a monthly payment.
Marketplaces that facilitate the sale and delivery of products to EU customers will be liable for EU VAT obligations.
Who Will the Changes Affect?
The changes will affect suppliers of goods and services to EU consumers, as well as facilitating marketplaces and postal couriers. Let’s look at each category and the changes that will apply:
Service suppliers selling to EU customers will be able to opt for the OSS scheme to simplify their tax reporting and compliance obligations. The choice of the EU member state where they’ll declare taxes will depend on their location and on whether they already have one or more establishments in the EU.
Sellers of products who have EU customers will have a common €10,000 threshold in the EU, above which they’ll need to comply with VAT regulations of the destination country (i.e. where their end customers are located).
EU B2C sellers dispatching goods from a single country will be able to file quarterly VAT returns under the OSS scheme, in addition to their regular VAT return.
Non-EU B2C sellers (including UK sellers) will also be able to use the One-Stop-Shop system and register as a Non-EU taxpayer in a member state of their choice (unless they’re already established in a given EU state). In addition to that, they’d still need to file a regular VAT return in at least one member state. The €22 VAT exemption limit will be removed.
Facilitating Online Marketplaces (OMPs)
Marketplaces will need to collect VAT in some instances:
- For products imported from non-EU countries, of a value under €150
- For products located in the EU and sold by non-EU sellers (of any value).
In addition to that, they’ll need to keep track of all sales transactions to EU customers.
Customs declarants (couriers) will need to clear all imports through customs. For products costing less than €150, they’ll be able to use a super reduced ‘H7’ dataset. In addition to that, they’ll be able to pay VAT on behalf of the customer via a monthly declaration.
How Can Fonoa Help You?
We recommend e-commerce businesses to prepare for these new rules timely. For volume businesses, this means ensuring your IT systems and e-commerce software are ready to handle the complexity these new rules bring and provide you (or your tax accountant) with adequate data to file your tax returns.
At Fonoa, we have developed a platform that is ready for the future and automates all aspects of your e-commerce VAT obligations.
A digital one-stop shop for online retailers with standard integrations to the world’s leading marketplaces and e-commerce tools like Shopify, Woocommerce, Magento and Opencart.
What’s more, reach out to us and we can help you handle your tax registrations, tax filings and representation where needed.