As of 1 July 2021, a significant number of rules regarding VAT for e-commerce will change. Madeleine Merkx, Professor of indirect tax law at Erasmus School of Law, summarises these changes in a recent broadcast of Tax Talks.
The current VAT rules in the EU concerning e-commerce are from the 90s and are not necessarily equipped for online sales platforms, but are meant for mail order companies. The new regulations change adapt those rules to better suit the present.
The five most important changes
Five significant changes regarding the VAT rules for online platforms are about to happen. First, the EU-‘distance selling’ threshold will be abolished. This threshold is meant to protect traders that make one-time shipments to specific EU countries. Without the threshold, traders would have to register as a rateable in that country. This old threshold is replaced by a general threshold for all types of distance sales in all EU countries. As a result, Dutch traders remaining under the limit of €10.000,00 will still be entitled to include Dutch VAT.
Secondly, the rule change will also eliminate the VAT exemption for the import of small shipments, limited to a value of € 22,00. The import will always be taxed with VAT from 1 July 2021 onwards, unless the import ruling is applicable, in which case the import be exempted nonetheless. Export-shipments up to € 150,00 will remain exempt from VAT.
Thirdly, in specific instances, platforms will be subject to VAT instead of suppliers. In most cases, the tax will be passed on to the customer.
Fourthly, the Mini One Stop Shop will be introduced. This should make tax declarations a lot easier. This regulation means that a taxable person should remit VAT in the EU member states in which the person lives. This regulation is only applicable to revenue generated from digital services but will become available to all consumer products.
Finally, an import regulation, as well as a post and carrier regulation, will be introduced. The import regulation means that traders with a ‘one-stop-shop no longer have to pay tax at the import of every shipment, but only once a month. The post and carrier regulation is applied to goods that are imported in the EU country of destination; the VAT is consequently collected from the receiver of these goods.
According to Merkx, various groups are affected by the new rules, particularly suppliers who sell goods from non-EU countries, platforms, and consumers who order goods from outside the EU. To a lesser extent, entrepreneurs selling goods within the EU and entrepreneurs providing services to consumers will be affected by the new scheme. Entrepreneurs who already apply the distance selling scheme and entrepreneurs who offer B2C services can file their returns in a simplified manner as of 1 July, but in which country they owe VAT and how much will not change, according to Merkx.