The EU VAT reform: invoicing for online marketplaces

The EU VAT reform: invoicing for online marketplaces

The EU VAT reform, in force since July 1, 2021, has a profound impact on the eCommerce industry, including online marketplaces. In fact, it has shifted the responsibility for invoicing and charging VAT from sellers to marketplaces for a big part of the transactions that those marketplaces facilitate.

In this article, we’ll look into the invoicing obligations and VAT liability of online marketplaces.

EU VAT: online marketplaces now have additional responsibilities

Online marketplaces, such as Amazon, AliExpress, eBay and Etsy, are now considered as the deemed supplier for a big part of the goods sold via their interfaces to EU customers. This means that collecting and remitting VAT becomes their responsibility on those transactions, and that they’ll need to issue invoices to customers.

As a result, they’ll need to:

  • Comply with local VAT and invoicing rules in all 27 EU countries
  • Issue multiple invoice per sale: from the seller to the marketplace and from the marketplace to the buyer
  • Issue self-billed invoices in some instances
  • Sometimes issue multiple invoices per order

Overall, the new invoicing obligations for marketplaces add a new layer of complexity to their EU operations, and they need to devote additional resources to handle this correctly.

Self-billed invoices for online marketplaces

Self-billed invoices might facilitate transactions where marketplaces are considered the deemed supplier. This is the case in two instances:

  • Imported goods sold by EU or non-EU sellers, of a value of less than €150
  • All goods sold by non-EU sellers (regardless of their value)

For those sales, a two-step process applies:

  1. A B2B supply from the seller to the marketplace takes place (no VAT is charged).
  2. A B2C supply from the marketplace to the buyer takes place (the marketplace needs to charge VAT to the buyer).

For the first step, the seller needs to issue an invoice to the marketplace, but this can be facilitated if the marketplace issues a self-billed invoice. Self-billed invoices would allow marketplaces to make sure they have all required invoicing documentation quickly, without needing to rely on the seller for this. To do this, however, they must have a contract in place with the seller, which allows for self-billing invoices.

Self-billed invoices will need to comply with the invoicing rules of the country where the goods are stored, which means that marketplaces will need to take into consideration and apply the invoicing requirements of all 27 countries of the EU, and apply the correct VAT exemption.

Invoicing requirements for multi-seller orders

Orders where a customer buys goods from multiple sellers make the invoicing obligations of marketplaces even more complex. Let’s look at an example:

A customer orders multiple items from Amazon, simply by browsing the marketplace’s listings. Most times, this means that they’ll be buying goods from multiple sellers. As a result, Amazon will need to issue invoices for the different sellers, both for the B2B transaction (if they have an agreement in place with the seller) and for the B2C transaction to the end customer.

E-invoicing in the EU

Many EU countries plan to implement e-invoicing as a standard practice in the next few years, and progressively make it mandatory. E-invoicing isn’t standardized in the EU, and each country has its own system and requirements. This means that marketplaces will need to deal with multiple e-invoicing requirements: send invoices for clearance to local tax offices, comply with additional reporting obligations, remit VAT via the tax office’s portal, and so on.

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