As of 1 July 2021, new European VAT rules for business-to-consumers (B2C) transactions will apply, impacting suppliers of services, goods, marketplaces and postal couriers.
Why these new rules?
- To facilitate EU cross-border trades;
- To ensure fair competition for EU suppliers;
- To combat VAT fraud.
- An extension of the optional declarative system to both B2C suppliers of services and goods, avoiding multiple VAT registrations and reporting obligations in the EU (called the One-Stop-Shop or “OSS”);
- The abolition of the “distance sales threshold” and the creation of a unique and common threshold of EUR 10,000 throughout the EU up to which B2C EU cross-border supplies remain subject to the VAT rules of the Member State of dispatch, and above which supplies become subject to the VAT rules of the Member State of destination;
- The abolition of the exemption for imported goods with a negligible value not exceeding €22;
- A single report scheme covering sales of imported goods to EU consumers up to a value of €150 and for which a VAT exemption upon import will apply if the trader declares and pays the VAT at the time of the sale using this declarative system (called the Import One-Stop-Shop, or “IOSS”);
- The possibility to make Customs declarants (e.g. postal operators or courier firms) liable to collect import VAT from consumers via a monthly payment;
- The shift of EU VAT liability to marketplaces when they facilitate the delivery of goods to the EU consumers.
Who is affected?
Suppliers of services to EU consumers
Various VAT rates currently apply to their services depending on their nature and the place of residence of the clients (e.g. transport services, catering services, leasing of means of transport, etc.).
As from 1 July 2021:
- Businesses may consider using the One-Stop-Shop (OSS) declarative system to lighten their reporting obligations;
- The choice of the EU Member State where they could register for the One-Stop-Shop declarative system will depend on where they are established and whether they have one or more fixed establishments in the EU.
Sellers of goods to EU consumers
The new VAT rules will impact their reporting obligations and their margins, depending on the value of the goods, their origin and whether marketplaces facilitate the sales. With the introduction of a common and unique threshold of EUR 10,000 through the EU, the new rules will lead to the systematic application of the VAT of the EU Member State of final arrival of the goods.
- If the sellers are small businesses selling less than €10,000 per annum of goods and services to consumers in other Member States, they will be able to charge domestic VAT and report their sales below this threshold in their regular domestic VAT return;
- If they are a B2C sellers dispatching their goods from a single EU Member State, they will no longer be required to register for foreign VAT and complete multiple VAT filings in the EU Member States where they are selling their goods to: they could opt to complete and file a quarterly return under the One-Stop-Shop declarative system alongside their regular domestic VAT return;
- If they are a non-EU sellers (including post-Brexit U.K.), they may also use the One-Stop-Shop declarative system by registering as a “non-Union” taxpayer with the tax authority of the EU Member States of their choice (except where they have already fixed establishments in the EU), they could then file quarterly returns under the One-Stop-Shop declarative system but would need to file a regular domestic VAT return in at least one EU Member State;
- If they sell imported goods, note that the low-value consignment stock relief (for goods valued at €22 or below) will be abolished, but for consignments of €150 euros or below, (1) they will only be required to charge VAT at the time of the sale by using the Import One-Stop-Shop (i.e. no VAT will be due on import), or (2) they could elect to have the import VAT collected from the final customer by the Customs declarant (postal couriers);
- If they are using online marketplaces to facilitate their transactions, they might de-register for VAT in certain EU Member States since the marketplace might become the deemed supplier of the goods, being responsible for collecting the VAT at the time of the sale.