Closing EU € 7 billion VAT loopholes for sales through online marketplace
One Stop Shop online
One stop shop is the new rules will come into force on 1 July 2021. There are design to make life simpler and fairer for all and close a €7 billion ($8.38 billion) tax loss, the EU says.
The European Commission reports that EU member states are losing out on an estimated €7 billion ($8.38 billion) in VAT revenue each year as the boom in online shopping grows and low value goods, like inkjet cartridges, are exempt from VAT when imported into the EU. At the same time, this exemption is not available for sales of low value goods produced within the EU.
The current rules are now being modernised. From 1 July 2021, the new rules will impact everyone in the ecommerce supply chain. It can online sellers and marketplaces both inside and outside of the EU.
The justification for these changes is to overcome the barriers to cross-border online sales. The address challenges arising from the VAT regimes for distance sales of goods and the importation of low value consignments.
One fundamental change is that online sellers, including online marketplaces/platforms, can register in one EU Member State. This will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU. The EU envisages that there will be a reduction in red tape of up to 95% when registering with the new One Stop Shop (OSS).
The rules are being introduced to ensure that VAT is paid where consumption of goods takes place, enabling consumers to see public revenues increase – thanks to increased VAT payments and less VAT fraud, all Member States will benefit, the EU said.
Main changes at a glance for One Stop:
- Suppose you own or run online marketplaces/platforms/One stop. In that case, special provisions will be introduced whereby if you are facilitating supplies of goods, you will be deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”).
- The EU will remove the EUR 22 VAT exemption on the importing of small consignments will be removed. All goods imported in the EU will now be subject to VAT.
- A new Import One Stop Shop (IOSS) scheme for distance sales of low value goods imported from third territories or third countries has been created to simplify the declaration and payment of VAT.
- The EU will introduce a new EU-wide threshold of EUR 10 000 for distance sales of goods will be introduced. After crossing new distance selling threshold 10,000 euro, VAT in German, Spain, Italy and Poland will be paid to the France Tax Office Authorities via OSS return. Sales below this EUR 10 000 threshold, including the supplies of TBE (telecommunications, broadcasting and electronic) services and distance sales of goods within the EU, may remain subject to VAT in the Member State where the taxable person is established.