The European Commission presented a series of proposals on Thursday 1 December to update the VAT (value added tax) rules that apply to e-commerce, with the goal of making life easier for companies which every year spend around €8,000 in registering for VAT in every country into which they sell.
“We want to cut red tape for companies, cut their costs and make it easier for consumers to buy goods and services”, said Commission Vice-President Andrus Ansip who has responsibility for the single digital market.
As already announced (see EUROPE 11676), the new rules are articulated around four key measures: - a one-stop-shop for online VAT payments; - rules specifically for micro, small and medium-sized companies; - removal of the VAT exemption for small consignments from a third country; - and an end to member states being able to apply a reduced or zero VAT rate on electronic books. The new rules could apply from 2021.
According to Economic and Financial Affairs, Taxation and Customs Commissioner Pierre Moscovici, these proposals should bring in between €5 million and €7 million per year for member states. The main measures are:
An EU-wide portal for online VAT payments. The Commission is proposing to replace the partial one-stop-shop that has existed since 2015 for electronic services (such as mobile telephone apps) with a more extensive one-stop-shop covering physical goods as well. This system will mean that companies which sell their products in more than one member state will be able to make one single quarterly return for the VAT due across the whole of the EU by means of the online one-stop-shop. The VAT will continue to be paid in the member state of the final consumer. To prevent the one-stop-shop being too great a strain on the collecting country, the Commission proposes that that state retain 5% of the revenue collected. It says that the new system will bring total annual savings of €2.3 billion for European businesses and reduce their administrative burden by 95%.
More favourable rules for micro-businesses and SMEs. The Commission is proposing new rules specifically for companies whose cross-border sales are limited. Simplified rules for identifying where their customers are based will apply to companies with cross-border sales of less than €100,000 (only one piece of evidence will be required rather than two, as of present). Online companies selling goods cross-border worth less than €10,000 per annum will continue to apply the VAT rules generally used in their country of origin. These thresholds could be applied as early as 2018 for e‑services and by 2021 for online goods.
Tackling VAT fraud from outside the EU. The Commission proposes removing the VAT exemption that currently applies to small consignments worth less than €22 that are imported into the EU. “There may be a slight increase in prices on imported goods from outside the EU up to a value of €150. However, this increase in price should be counterbalanced by more efficient delivery times and consumer certainty that the price paid online will not need to be topped up by extra charges on delivery”, the Commission notes.
Changes to taxation of electronic publications. The new rules should allow member states, if they wish, to bring in reduced VAT on e-books (see EUROPE 11318). Currently, most states (the exceptions being Bulgaria and Denmark) apply a lower rate of VAT on printed books. A few years ago, France, followed by Luxembourg, tried to introduce the same treatment for online books but, in 2013, the Court of Justice of the EU ruled against them (see EUROPE 11268). “The lists of VAT rates should not be set out here but by the member states making their own decisions”, stated Moscovici, stressing that “a book is still a book” and “a newspaper is still a newspaper”.
The proposals have generally been well received by, for example, the S&D Group in the European Parliament, the European Publishers Council, the European and International Booksellers Federation and EuroCommerce, the European retailers’ organisation. “Clearly VAT rules need to be updated to meet the needs of the digital economy and the increasing complexity of businesses in the EU”, said the S&D spokesperson on economic and monetary affairs, Pervenche Berès (France), highlighting that change had been called for in a resolution passed by Parliament in 2011. EuroCommerce Director General Christian Verschueren was cautious: “Since tax rules require the unanimous agreement of member states, EuroCommerce worries that these valuable moves to modernise VAT may be delayed or watered down”. (Original version in French by Sophie Petitjean with Élodie Lamer)