In order to secure VAT revenue in the EU, the 2nd stage of the VAT e-commerce package will come into force in all EU Member States on 1 July 2021. These are the new rules:

• In principle, distance sales are subject to VAT in the country of destination.
• Import consignments with a value of up to € 150 are only exempt from import VAT if special reporting requirements are satisfied.
• Supplies via electronic interfaces (marketplaces, platforms, etc.) are regarded as fictitious chain transactions.

Who is affected?

The changes mainly affect online retailers in the B2C business with so-called distance sales, which are defined as follows:

• supply of goods to a non-taxable person;
• the transport of goods crosses borders within the EU (intra-Community distance sales); or
• goods are imported from a third country into an EU Member State (distance sales of imported goods); and
• the transport of goods is organised by the supplier.

B2B sales or sales where the customer arranges the transport are not subject to the new rules.

Value added tax in the country of destination

Intra-Community distance sales are subject to VAT in the country where the transport of the goods ends if the supplier exceeds the threshold of € 10,000 (net) per year. Alternatively, the retailer may choose not to apply this threshold from the outset. The threshold includes not only distance sales but also all electronic services provided to other EU Member States. The previous national sales thresholds of mostly € 35,000 and in some countries € 100,000 are no longer applicable.

MOSS becomes OSS (One Stop Shop)

In order to avoid registration for VAT purposes in each EU country of destination, the Mini One Stop Shop procedure (MOSS), previously only used for electronic services, will be extended to become a One-Stop-Shop (OSS), i.e. it will also be used for distance sales. Registration for OSS is voluntary, but offers advantages.

• Suppliers can report VAT online for their B2C distance sales to other EU countries in their country of residence. In Germany, the BZSt (Federal Central Tax Office) is responsible for this.
• Taxable persons from third countries may choose an EU Member State for OSS registration.

The reporting of VAT on distance sales to be paid to the individual EU countries of destination is carried out centrally via the portal in the country of residence or identification, within 30 days of the end of the respective quarter (reporting period).

ATTENTION! The OSS procedure is not applicable in case of intra-Community shipments (e.g. in a fulfilment service structure). This requires VAT registrations in each country of storage.

Import consignments (imports) up to € 150

The VAT exemption for import consignments with a value of up to € 22 will cease to apply from 1 July 2021. Then every import must be declared to customs so that import VAT can be levied. However, import VAT for consignments with a value of up to € 150 is not charged if the VAT from this consignment is reported in the IOSS.

Import One Stop Shop – IOSS

With the registration in the Import One Stop Shop (IOSS) the retailer receives an individual VAT number, which has to be stated on the import customs clearance. In these cases, no import VAT is charged on consignments with a value of up to € 150 sent to an EU end consumer. When reporting and paying VAT on this supply in the IOSS, this VAT number must also be provided so that a data reconciliation can be carried out to satisfy the VAT obligations. The IOSS provides for monthly reporting.

Imports not declared under the IOSS procedure are subject to import VAT, which is payable by the distance seller, the courier or the consignee, depending on the agreement.

VAT liability for electronic interfaces (online marketplaces, platforms, online portals and others)

In order to tackle the problem of non-declaration of VAT on imports from third countries, electronic interface providers are now included in the supply chain, so that a fictitious chain transaction with two separate consignments is assumed.

This fiction applies whenever consignments of goods with a value of up to € 150 are imported into the EU from a third country and sold via an online marketplace to an end consumer in the EU. It is irrelevant whether the importing online retailer is based in a third country or in the EU.

If the electronic interface is registered in the IOSS to report the VAT on the outgoing transactions with the imported goods with a value of up to € 150 to the end customer (whereby the online retailer must state the IOSS VAT number for this transaction), then no import VAT is due for this import.

This means that the electronic interface is obliged to pay VAT on the goods or services supplied to the end customer to the tax authorities. The preceding fictitious supply of the online retailer to the electronic interface is tax-free.

It will be a challenge to identify all cases in which a so-called chain transaction must be considered for VAT compliance.

• From 1 July 2021 new rule for distance sales to private individuals
  • For cross-border distance sales to private individuals, VAT must be paid in the country of destination if such sales, together with certain electronic services, exceed € 10,000 per year. The previous national sales thresholds (mostly€ 35,000 and in some countries € 100,000) no longer apply.
  • Consequence: Obligation to register and pay VAT in each country of destination
  • One Stop Shop (OSS): Option to register for the new One Stop Shop procedure in the state of residence with central reporting and clearing of the VAT payment.

This rule does not apply to B2B transactions, nor does it apply when online marketplaces with fulfilment services are used.

• New regime for distance sales of imported goods
• For imports with a value of less than € 22 the exemption from import VAT does not apply.
• Import One Stop Shop – IOSS: In the case of sales to private individuals up to € 150 from a third country territory, no import VAT is due at the time of import if the VAT on the sale is reported in the Import One Stop Shop.

For imports with a value of over € 150 € per consignment, import VAT will be levied as before.

• New obligations for electronic interfaces

A chain transaction with two separate supplies is fictitious if consignments of goods up to a value of € 150 are imported into the EU and sold to an end consumer in the EU via an electronic interface.

The electronic platform must pay the VAT from the sale to the end customer via the IOSS to the tax authorities in the country of destination. The preceding fictitious supply of the retailer to the electronic interface is tax-free.

Status: 12 July 2021

Author: Marion Triess, Certified public auditor, Certified tax advisor; Eulalia Galceran, Head of Spanish-German Desk,

Source: This article was originally published in the magazine ”Economia Hispano – Alemena ”, edition 02/2021, issued by the German-Spanish Chamber of Commerce.

Photo: Adobe Stock, joda

---

No token or token has expired.