The new EU VAT systems in e-commerce apply from 1 July 2021 As with any new initiative, problems arise at first, but ultimately new e-commerce systems can revolutionise the way companies charge and clear VAT on e-commerce transactions. In addition, this may address the problem of uncollected VAT on e-commerce transactions resulting from the withdrawal of the VAT exemption for imports of low value consignments not exceeding 22 EUR.
In its Communication on a Digital Single Market Strategy for Europe, 2015 The European Commission has announced that the new e-commerce rules will address the challenges arising from VAT systems for distance selling of goods and abuse of VAT exemption for imports of low-value consignments. There are several benefits, including:
- the ability of EU companies to operate in a fair and competitive digital economy,
- increase in VAT revenue for Member States due to increased VAT payments and reduced VAT fraud,
- a simplified online purchasing and supply environment for EU consumers.
The new schemes include online transactions between companies and consumers concerning goods and services in the EU by:
EU companies
non-EU companies
EU or non-EU electronic platforms, such as websites and trading platforms that enable distance selling of goods.
In principle, in accordance with the ordinary VAT rules, a taxable person selling goods or services at a distance in any Member State in which he is obliged to pay VAT shall be obliged to register for VAT purposes in each Member State. This leads to a number of VAT registrations in different Member States.
The new Import-One-Stop-Shop (IOSS) program is based on the Mini-One-Stop-Shop (MOSS) simplification program, introduced in 2015 for the provision of telecommunications, broadcasting and electronic services. The new schemes extend the scope of MOSS to apply to the sale of goods at a distance and to all service supplies.
In this way, simplification confers an advantage in the form of VAT registration only In one Member State (country of identification) and submission one VAT return with payment of VAT charged for supplies in individual Member States (Member States of consumption).
It is worth noting that registration in systems is voluntary and possible only after meeting certain criteria.
The non-EU programme includes non-EU companies providing services in the EU. On the other hand, Parties to the Union system shall include:
- cross-border provision of services by EU companies
- intra-EU distance sales by EU or non-EU companies
- distance, national and intra-EU sales by electronic interface
- dispatch sales of low value consignments (not exceeding 150 EUR) by EU or non-EU companies through electronic platforms and imported from countries third.
- charging and collecting VAT for Member States where the goods will be delivered
- making of customs declarations
- keeping records of transactions.
Moving through the complexities of new e-commerce patterns can be complicated. Therefore, it is important to seek expert advice.
Case study
A Taiwanese company sells to EU consumers goods of a real value not exceeding 150 EUR via your own website and the Internet interface already registered in IOSS.
Knowing that the abolition of the VAT exemption 22 EUR to import goods into the EU can make it uncompetitive, decides to explore the possibility of registering its website in the IOSS system. Taiwanese company can register under IOSS only for sale via its own website. Its online sales are subject to registration of the interface.
The company may register in any EU Member State, but must appoint an intermediary established in that Member State to fulfil its EU VAT obligations, which include:
IOSS monthly VAT return and payment
VAT collection from the buyer
ensuring that the goods are dispatched in consignments of a value not exceeding 150 EUR payments.
To do so, Taiwanese companies must:
- charge VAT at the rate applicable in each Member State where the sale takes place
- keep a record of these transactions
- provide the intermediary with this information together with the VAT collected from customers.
It's just a brief review of IOSS duties. For more detailed information and advice, you should consult the EU VAT adviser.
About the author
Charles Vella, Bridge, Malta
Charles is a senior VAT adviser at Zampa Debattista, a member company Russell Bedford Malta.
He joined the company 2014, after retiring from public service. Charles is a VAT expert, has worked in the VAT department since the introduction of VAT in Malta, holding several higher positions, including the Director of Legal and International Affairs and the Director General of VAT. Charles has contributed significantly to the development, growth and consolidation of the VAT team in Zampa Debattista.