International Tax News – April 2021
E-Commerce: A mini-guide to the New VAT regime in the European Union for foreign companies
The international tax environment is constantly changing, and companies as well as individuals need to keep themselves updated on those evolutions, and adapt their situations and structuring to comply with fiscal rules that may apply to them.
With more than 20 years of expertise in International tax advisory, Alpha Prime provides updates and analysis on the evolution of the tax environment of its clients and business partners.
We remain at your disposal to answer to more specific needs.”
Nicolas Michaux, Founder
No need to mention it, E-commerce is booming, and this trend is amplified by the impact of the Covid-19.
More and more companies are switching to digital to sell their products online.
As a result, new VAT rules for e-commerce have arisen from the European Union, which will start to apply from July 1, 2021.
This regime applies to B to C transactions, where a non-EU Company sells online its products to a private customer (not VAT taxable) based in Europe.
If the new regime mainly targets sales of goods, it also applies to supplies of services.
In other words, from July 2021, all European distance sales will be taxed in the Member State of consumption
Key points:
- Above 10,000 euros per year of turnover generated in Europe, you have to settle the VAT in the Member State of your customer.
- Extension of the“one-stop shop” solution, that exempts you from applying for a VAT number and submit local VAT returns in every EU country where you sell: One declaration for all your transactions throughout Europe is sufficient. This Mini-One-Stop-Shop (“MOSS”) allows suppliers to report and pay their VAT on their EU-wide distance sales on one single portal
- No more threshold on low-value transactions: Every transaction made into the EU will be VAT taxable
- Electronic interfaces (e.g. a marketplace, platform, portal or similar means) will be deemed to make the sales for VAT purposes (i.e. deemed to have received from the businesses and supplied the goods themselves to the EU consumers) when facilitating :
— distance sales of imported goods from third territories
— supply of goods within the Community carried out by non-EU businesses to EU non-taxable persons.
As a result, the interface will be liable for the VAT due on the sale to the European-based customers.
- Place of taxation:
- Scenario 1: (Country of import = country of delivery) :
The supplier has the choice, only in the event of consignments with an intrinsic value (LVG) not exceeding EUR 150, to opt for the IOSS scheme, which means that the distance sales will be subject to VAT in the country where the goods end.
If he does not opt for this IOSS scheme, or when the value exceeds EUR 150, import VAT will be paid by the person designated by the Member State of import regulations. - Scenario 2: (Country of import ≠ country of delivery) :
If the supplier opts for the IOSS scheme, or if the value exceeds EUR 150 :
— there is an import in the country of import for which VAT will be paid by the person designated by the country of import regulations;
— there is a distance sale of imported goods subject to VAT in the country in which dispatch or transport of the goods to the customer ends
- Scenario 1: (Country of import = country of delivery) :
If case of an option for the IOSS scheme, the taxable person will be granted for a special VAT number for the purposes of its activity of distance sales.
VAT will become chargeable when the payment will be accepted.
As you see, the new VAT regulation applicable to E-commerce businesses will have a significant impact from July 1st of 2021.
As a distance selling company, we do encourage you to contact our team and expert to anticipate those changes, adapt your organisation, and optimise your situation.
