New VAT rules for e-commerce in the EU
Cross-border VAT for e-commerce is being modernised in the EU with the aim of making the process simpler and to create a more level playing field for all businesses. Three reforms will be rolled out
- The One Stop Shop Scheme
- The Import One Stop Shop Scheme
- Provisions relating to online marketplaces
The new rules come into force on 1 July 2021. It is important to note that these VAT changes are EU changes and do not change the current UK VAT legislation. Therefore, the place of supply rules for a UK businesses are not changing.
The One Stop Shop Scheme
The OSS is an extension of the VAT MOSS scheme, which simplifies the collection and payment of VAT for supplies of telecommunications, broadcasting and electronic services. OSS is being introduced to simplify the VAT obligations relating to the distance sales of goods and any cross-border services supplied to final consumers if the place of supply is in the EU.
More information on the OSS can be found here.
The Import One Stop Shop Scheme
From 1 July 2021 the VAT exemption at importation of small consignments of a value up to EUR 22 will be removed. Therefore, from 1 July 2021, all commercial goods imported to the EU from a third country or third territory will be subject to VAT irrespective of their value.
If a UK business selling goods to the EU does nothing, then their customers will be required to clear their own goods, resulting in hidden charges and additional hassle. Therefore, by choosing to use the IOSS for consignments with a value of less than EUR 150, the UK business can collect, declare and pay the VAT to the tax authorities instead.
This is not a compulsory scheme and the choice of whether to use it is a business decision, rather than one of compliance.
More information on the IOSS can be found here.
Provisions relating to online marketplaces
Special provisions are also introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves. They will be known as a ‘deemed supplier’.
In addition, new record keeping requirements are introduced for online marketplaces/platforms facilitating supplies of goods and services, including where such online marketplaces/platform are not a deemed supplier.