On Thursday 1 July, the new value added tax (VAT) rules for e-commerce, adopted in 2017, came into force (see EUROPE 11919/3). Initially scheduled for 1 January 2021, their application was postponed by six months due to the Covid-19 pandemic (see EUROPE 12533/20).
In concrete terms, what changes for sellers? Firstly, goods worth less than €22 imported into the EU from third countries will no longer be exempt from VAT.
In practice, this exemption was often abused by sellers who fraudulently labelled small deliveries in order to benefit from the exemption. This loophole reportedly cost EU tax administrations at least €7 billion a year, according to European Commission estimates.
The new rules should also make life easier for European online sellers, who will be able to register in a digital “one-stop shop” (OSS) where they will now be able to fulfil all their VAT obligations related to sales throughout the EU.
They no longer need to register for VAT in each Member State in which they have a turnover above a certain overall threshold, which varies from country to country. From today, these different thresholds are replaced by a common threshold of €10,000, above which VAT will have to be paid in the Member State where the goods are supplied. Online sellers will be able to register in their own Member State and pay VAT in the One Stop Shop for all their sales in the EU by means of a quarterly declaration. The One Stop Shop will then forward the VAT to the Member State concerned.
In the same vein, an “Import One Stop Shop” (IOSS) has been set up for third country sellers to enable them to register easily for VAT in the EU and ensure that the correct amount of VAT is paid to the Member State where the tax is ultimately due.
For consumers, this is also important because when they make purchases from a third-country vendor registered in this One Stop Shop, VAT will be included in the price paid to the vendor. In other words, no more calls from customs or the post office asking for a surcharge when the goods arrive in the consumer’s country of origin, as VAT will already have been paid.
On the other hand, for sellers who are not registered in the One Stop Shop, the European Commission urges consumers to be vigilant and to bear in mind that they will be charged VAT and any other shipping costs when the goods are imported.
According to a European official, the good news is that the big names in e-commerce platforms, such as Amazon and eBay, have already registered with the One Stop Shop or have signalled their intention to do so soon. (Original version in French by Marion Fontana)