New VAT rules for e-commerce: this year it is really going to happen

Recently, Madeleine Merkx, professor by special appointment of indirect tax law at Erasmus School of Law, wrote an opinionated blog post regarding the VAT rules for e-commerce. You can read the blog below:

I can still remember when I made my first online purchase. It was 2003. At the time, I was still uncertain whether I would receive the book I had ordered. By now, online purchases have become very normal and part of our daily lives. And we do not only buy at Dutch webshops, but also at webshops in other countries. Webshops like Amazon, Ebay, Alibaba and many others have become household names.

In VAT, we are currently applying the rules that were once designed for mail order companies in the early 1990s to these webshops. (For those who didn't experience that: that is the predecessor of the webshop where you didn't order online, but through a form you sent by post. To find out what the shop had to offer, you were sent a large catalogue). These rules had to prevent consumers from shopping cross border because, according to the main rule, supplies are taxed in the country of departure of the goods. A business could establish itself in a country with a low VAT rate, for example Luxembourg, and send goods from there. The distance selling rules (applicable to those mail order companies and now web shops) stipulate that if conditions are met, supplies are taxed in the country of arrival. In this way, competitive conditions within the EU could be safeguarded.

These rules from the early 1990s will be amended as of 1 July 2021. In short, the change means that almost all supplies of goods will be subject to VAT in the country of the consumer. There will only be an exception for small entrepreneurs selling goods within the EU. The rules aim to create a more level playing field. Nevertheless, I see major challenges within the new rules. For example, fraud is still lurking, many obligations are placed on platforms and the verification of compliance with the new VAT rules is also a challenge. I already spoke about this in my inaugural lecture. Despite these challenges, it is actually going to happen on 1 July 2021. The European Commission and most EU countries see no point in further delaying the rules. Therefore, 2021 will be a challenging year in the field of VAT. Also the customs aspects of the new rules should not be underestimated.

On 29 March, I will be giving a master class on this subject for students (in Dutch). Interested in this or other masterclasses? Sign up!