On 1 July 2021, the VAT rules on cross-border-business-to-consumer (B2C) e-commerce activities changed. The rationale for these changes is to overcome barriers to cross-border online sales and address challenges arising from the VAT regimes for distance sales of goods and for the importation of low value consignments. It is envisaged that EU Businesses will be able to grow in a simplified, fairer environment within the European Digital Single Market.
Online sellers, including online marketplaces can register in one EU Member State and 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. Businesses should benefit from a reduction in red tape of up to 95% by registering with the new One Stop Shop (OSS).
The existing thresholds for distance sales of goods within the EU will be abolished and replaced by a new EU-wide threshold of €10,000. Below this €10,000 threshold, 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.
The VAT exemption on importation of small consignments of a value up to €22 will be removed. This means all goods imported in the EU will now be subject to VAT. The Import One Stop Shop (IOSS) has been created to simplify the declaration and payment of VAT. For consignments of €150 or less imported directly from Non-EU countries, businesses can now charge VAT at the point of sale instead of customers having to pay import VAT on delivery.
For Non-EU based suppliers they must either register for IOSS through an EU established intermediary, or, should the country where they are established have a mutual assistance agreement with the EU, then they can register for IOSS directly.
If your business if affected by these changes – talk to us today!