New EU VAT rules simplifying e-commerce adopted
On 5 December 2017, the European Council adopted new rules making it easier for online businesses to comply with EU VAT obligations. The rules will facilitate the collection of VAT for businesses that sell goods and services online to consumers.
The new rules extend an existing EU-wide portal (the mini 'one-stop shop' = MOSS) for the VAT registration of distance sales. In addition they establish a new portal for distance sales from third countries with a value below €150. VAT will be paid in the member state of the consumer, ensuring a fairer distribution of tax revenues amongst member states. Additionally, online platforms will be made liable for collecting VAT on the distance sales that they facilitate, this includes sales of goods that are already being stored by non-EU companies in warehouses. Most goods that are imported for distance sales currently enter the EU VAT-free, resulting in unfair competition for EU businesses. Online platforms will be liable for collecting VAT on the distance sales they facilitate through their platform.
For start-ups and SMEs, the new rules introduce an important simplification. Below €10 000 in yearly cross-border online sales, a business will be able to continue applying VAT rules used in its home country.
Furthermore, the new rules remove the exemption for consignments from outside the EU worth less than €22. Around 150 million small consignments are imported free of VAT, and the current system is open to abuse. Whilst EU businesses have to apply VAT regardless of the value of the goods sold, imported goods benefit from the exemption and are often undervalued in order to do so.
The timeline will be as follows:
- by 2019 Simplify VAT rules for start-ups, micro-businesses and SMEs selling goods to consumers online in other EU Member States. VAT on cross-border sales under €10,000 a year will be handled according to the rules of the home country of the smallest businesses, giving a boost to 430 000 businesses across the EU. SMEs will benefit from simpler procedures for cross-border sales of up to €100,000 annually.
- By 2019 of simplification measures for intra-EU sales of electronic services.
- by 2021 the extension of the one-stop shop to distance sales of goods, both intra-EU and from third countries (meaning that they do not need to register in all EU Member States where they sell to consumers),
- by 2012 the elimination of the VAT exemption for small value imports (euro 22).