Significant new VAT-rules proposed for cross border e-commerce trade
In order to reduce the VAT burden for e-commerce businesses the European Commission has recently announced various VAT-changes. The changes should in particular support small and medium sized businesses that provide services and goods to consumers (B2C) throughout the EU.
The proposed measures are intended to take effect from either 2018 or 2021. The proposal involves the following main topics:
- Harmonized local thresholds for sales of goods and services within the EU;
- Extension of the Mini One Stop Shop (‘MOSS’) scheme in order to minimize local registrations;
- Application of home country rules for EU VAT compliance requirements;
- Special scheme for distance sales of goods imported into EU;
- Simplification of customer identification rules for online sales.
In the remainder of this alert we briefly explain the most relevant changes.
Please note that these proposals will not have effect until the EU Member States have voted for the changes.
Threshold of €10,000 for e-services (2018)
Currently local rules apply to taxation of e-services provided to consumers, which may require payment (and registration) of VAT in several countries. This means that the VAT compliance burden for entrepreneurs servicing consumers in several member states is relatively high. The proposal aims to set a threshold of €10,000 for such e-services (electronic and telecommunication) as of 1 January 2018. Below the threshold providers are allowed to pay VAT in their home country. Above this threshold, VAT should be paid by providers in the country of the consumer. This threshold should allow relatively small enterprises to do business throughout the EU without complex local VAT compliance.
Harmonizing thresholds intra-EU distance sales of goods (2021)
Currently the VAT rules of the home country of the provider of goods to consumers are applicable. The rules of the consumers’ country apply if a certain threshold has been reached.
This threshold differs significantly between EU member states. To allow a level playing field for every entrepreneur, it is proposed that the different thresholds will be replaced by a harmonized threshold of €10,000 as of 2021.
Extension Mini One Stop Shop scheme (2021)
Currently companies can use the MOSS-scheme for filing and paying local VAT returns in relation to e-services supplied to consumers. The MOSS-scheme allows companies to deal with EU VAT obligations via one portal in their home country. It is proposed to extend the use of this portal to other services and goods supplied to consumers. The MOSS scheme should be available for both EU companies (goods and services) and non-EU companies (only services).
Home country rules apply for VAT compliance requirements for e-services (2018) and online sales of goods (2021)
At the moment it is often unclear which rules apply in relation to invoice and record keeping requirements if a company is servicing customers in several EU countries. The proposal will allow EU companies to apply the rules of their home country in the area of invoicing and record keeping instead of complying with the different requirements of all EU Member States. For e-services it is envisaged that the rules change from 2018. For goods the start date would be 2021.
Special scheme applies for non-EU providers for supplying services and sales of goods to EU customers (2021)
At the moment, the import of goods into the EU with a value below €22 is VAT exempt. This exemption will be abolished. Instead, a special scheme for the import of goods into the EU is proposed. The scheme will be applicable to the importation of goods with an intrinsic value not exceeding €150 and allows importers to use a single point of registration (VAT One Stop Shop) to declare import VAT. Users of the scheme will be able to submit a periodic VAT-return to pay import VAT rather than making payment directly at the EU border. Non-EU companies will also have the option of appointing an EU contact that is mandated to make use of this scheme. For importation of goods with a higher value, the rules will not change significantly.
Simplified rules for identifying customer e-services (2018) and online goods (2021)
To be able to determine in which country the consumer resides and consequently which VAT rules apply, several actions should be taken. It is proposed that as of 2018 for e-services and as of 2021 for goods, the determination of the country of residence should be made easier. These measures however will only apply to e-services and goods with a volume of less than €100,000.
How the actual plans will be structured will become clear in the coming years. It is however of importance to adopt your (future) business to the changes in the EU VAT landscape.
If you have any questions on the new VAT rules for e-commerce, please contact:
Senior Manager VAT services
+31 (0)88 – 20 55 000
+31 (0)6 – 15 00 48 62