From 1 July 2021, the EU is introducing substantial changes to the VAT rules around ecommerce. The changes will impact businesses making business to consumer (B2C) supplies of goods. The new ecommerce rules will include 3 major changes:
- Launch of the One-Stop Shop (OSS) EU VAT return,
- End of low value import VAT exemption, and introduction of the Import One Stop Shop return (IOSS), and
- Making online marketplaces deemed suppliers for VAT.
One Stop Shop
The OSS allows for a single, EU-wide VAT return for the intra-EU supply of goods to consumers throughout the EU. It will allow businesses registering for OSS to pay VAT on B2C supplies made within the EU through a single OSS VAT return.
Introduction of the OSS coincides with the lowering of the EU distance sales threshold to a total of €10,000 across the EU member states. Once this threshold is breached VAT must be charged at the rate in the customer’s country. However, to avoid the need to register for VAT in all countries where the threshold has been breached, the sales for all EU countries can be reported and paid through one OSS return.
UK businesses which make distance intra-EU B2C sales of goods will need to register for OSS in an EU member state in order to submit OSS returns as this facility is only available to businesses registered for VAT in the EU.
Import One Stop Shop
The VAT exemption on imports of small consignments of a value up to €22 will be abolished from 1 July 2021. This means all goods imported in the EU will now be subject to VAT. However, for UK (and other RoW) businesses importing low value goods (less than €150) into the EU on behalf of their customers, the IOSS simplifies the declaration and payment of VAT. The IOSS allows suppliers selling imported goods to consumers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay VAT when the goods are imported into the EU. Like the OSS, an EU registration will be required. UK businesses will need to appoint an EU-established intermediary to fulfil their VAT obligations under IOSS.
Sellers registered for IOSS will need to collect VAT at the rate applicable in the EU Member State where the goods are to be delivered. This VAT is the import VAT which is due in the country of destination. IOSS returns will be submitted and paid monthly by the intermediary the business has appointed.
Where goods with a value of over €150 are imported for sale to a customer, a VAT registration may be required in the country of destination where a UK business (rather than the customer) imports goods into the EU and then makes the supply in the destination country. If the UK business does not have an establishment in that EU country, it will not benefit from a VAT registration threshold and will usually be required to register for VAT locally as soon as a sale arises.
Starting 1 July 2021, new rules will apply to sales via electronic interfaces such as online marketplaces/platforms. Marketplaces may become “deemed suppliers”, where certain conditions are met and they will have additional record keeping obligations.
The European Commission views a marketplace as a deemed supplier if it facilitates:
- Distance sales of goods imported to the EU with a value not exceeding €150; and/or
- Supplies of goods to customers in the EU, irrespective of their value, when the underlying supplier/seller is not established in the EU and the goods are already in the EU.
Where a marketplace is a deemed supplier in relation to a transaction, it is treated as if it has received and then supplied the goods itself and must make the associated VAT declarations and payment. Online marketplaces will be able to use both OSS and IOSS to assist with the increased VAT administrative burden.
Marketplaces will be required to keep records of all transactions, whether they are deemed suppliers or not, for at least ten years.
These changes will impact on many UK businesses selling goods to the EU, either directly or via online marketplaces such as Amazon. The EU has issued guidance on dealing with these changes, which can be accessed here and it is important that any business that may be affected ensures that it has taken account of the new rules.
Constable VAT can assist with this matter. Your business may be eligible to apply for the SME Brexit Support Fund. Smaller businesses can get up to £2,000 to pay for practical support, including training or professional advice to adjust to new customs, rules of origin and VAT rules when trading with the EU.
Please note that this blog is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.