Services

VAT

Deferral of the introduction of the VAT eCommerce package

In a previous tax issue we discussed the Action Plan adapted by the EU Commission to reboot the current EU VAT system and in particular the four “quick fixes” that were introduced with effect from 1 January 2020. Part of this plan was the proposed extension of the Mini One Stop Shop (MOSS) to “distance sales”.

The new rules were due to come in effect from 1 January 2021. However, on 8 May 2020 the Commission proposed to postpone the introduction of new e-commerce VAT rules by six months to 1 July 2021 because of the practical difficulties created by the lockdown measures taken to contain the coronavirus pandemic.

The new rules are referred to as the VAT e-commerce package and aim to significantly expand the scope of the MOSS scheme which currently applies to business-to-consumer (B2C) supplies of telecommunications, broadcasting and electronic (TBE) services in the EU. The new One Stop Shop (OSS) will now include other B2C services and B2C supplies of goods (distance sales).

Currently there is a huge administrative burden on businesses who supply B2C goods where they breach the ‘distance sale threshold’ as the business is forced to register for VAT in the other EU jurisdiction and operate VAT accordingly. Under the new rules, EU based suppliers will report these supplies under the revised ‘One Stop Shop’ which will eliminate the requirement for multiple VAT registrations in different jurisdictions.

The principle of taxing in the country of destination will also apply to all other services supplied B2C which will all be reported through the OSS. A threshold of €10,000 will apply to the total value of both TBE services and ‘distance sales’.

The 2021 changes also include new VAT rules applicable to a taxable person who facilitates supplies by way of an ‘electronic interface’ (e.g. a website). These new rules relate to the online sale of goods by a vendor outside the EU. Where goods are imported from outside the EU and have a net value in excess of €150 the online platform will be deemed for VAT purposes to be the supplier of goods sold to customers in the EU by companies using the marketplace or platform and will have to collect and pay the VAT on these sales. These new deeming rules will also apply to all online platform sales if the goods are located in the EU at time of sale.

An import scheme will be created covering distance sales of goods imported from third countries or territories to customers in the EU up to a value of €150. The seller will charge and collect the VAT at the point of sale to EU customers and declare and pay that VAT globally to the Member State of identification in the OSS. These goods will then benefit from a VAT exemption upon importation. The introduction of the import scheme will coincide with the abolition of the current VAT exemption for goods in small consignment of a value of up to €22.

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Ronan McGivern

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