VAT & Taxation

New Value-Added Tax (VAT) rules for online shopping enter into force today to simplify life for all businesses and introduce more transparency regarding pricing and consumer choices.  The new rules will affect online sellers and marketplaces platforms both inside and outside the EU, postal operators and couriers, customs and tax administrations, as well as consumers.

The total online EU cross-border market represents a turnover of €146 billion in 2020 (excluding travel), a YTD increase of 35%, mainly due to the pandemic.

A number of changes will be introduced to the way VAT is charged on online sales, whether consumers buy from traders within or outside the EU:

(I) As of 1 July 2021, goods imported into the EU valued at less than €22 by non-EU companies will stop being exempt from VAT. This means that VAT will be charged on all goods entering the EU – just like for goods sold by EU businesses. Studies and experience have shown that this exemption has been abused, with unscrupulous sellers from outside the EU mislabelling consignments of goods in order to benefit from this exemption. This loophole allows these companies to undercut their EU competitors and costs EU treasuries an estimated €7 billion a year in fraud, leading to a bigger tax burden for other taxpayers.

(II) As of 1 July 2021, online sellers may now register in their own Member State and own language. Once registered, the online retailer can notify and pay VAT in an electronic portal called the ‘One Stop Shop’ for all of their EU sales via a quarterly declaration. The One Stop Shop will take care of transmitting the VAT to the respective Member State. This means no complex VAT registration in each Member State in which they had a turnover above a certain overall threshold, which varies from country to country. From 1 July, these thresholds will be replaced by one common EU threshold of €10.000 above which VAT must be paid in the Member State where the goods are delivered.

Already launched in 2015 for cross-border sales of electronic services, the ‘VAT Mini One Stop Shop (MOSS)’ scheme is now extended to physical goods with a common threshold of €10.000.

(III) As of 1 July 2021, in the same spirit, the introduction of an Import One Stop Shop for non-EU sellers will allow them to register for VAT in the EU and will ensure the correct amount of VAT makes its way to the Member State in which it is finally due. For consumers this means a lot more transparency: when you buy from a non-EU seller or platform registered in the One Stop Shop, VAT should be part of the price you pay to the seller. That means no more calls from customs or courier services asking for an extra payment when the goods arrive in your home country, because the VAT has already been paid.

Already, businesses outside the EU have been registering in large numbers for the Import One Stop Shop, including the biggest global online marketplaces.