The European Commission has confirmed that new European VAT rules for business-to-consumer (B2C) transactions will come into force on 1 July 2021. From this date, B2C sellers that dispatch their goods from a single country under delivery terms that result in the seller being the Importer of Record (IoR), will no longer be required to obtain multiple foreign VAT registrations and file consequent VAT returns in the countries in which they are selling too.
The new rules form part of the EU’s new e-commerce package, which was originally due to come into force on 1 January 2021 but was postponed due to the challenges created by the Coronavirus pandemic. The main aim of the package is to simplify VAT obligations for companies who carry out cross-border sales of goods and certain services (mainly online) to consumers. This is being introduced to ensure that VAT is correctly paid to the Member State in which the supply takes place.
What are the current EU rules?
Currently, businesses from outside of the EU are (typically) required to register for VAT in each Member State to which they supply goods or services when a given threshold is exceeded. For goods, the thresholds range from €35,000 to €100,000 and vary between countries.
Businesses who offer B2C digital services are already able to use the Mini One-Stop-Shop (MOSS) to declare VAT due on supplies in a single quarterly VAT return by registering in just one EU member state.
However, currently, there is not a declarative system for those selling physical goods. This means that goods imported from non-EU countries with a value above €22 (£15), where the seller is the IoR, must register in each EU member state and make the appropriate declarations.
What are the new EU rules which will be introduced from 1 July?
From 1 July 2021, the EU are removing distance-selling thresholds and introducing a similar One-Stop-Shop (OSS) for B2C suppliers of all goods and certain services, where stocks are held in an EU member state.
For businesses importing goods from outside the EU, a new Import One-Stop-Shop (IOSS) will become available for sales of goods under €150. This will allow online businesses to report all their sales of goods to consumers across Europe in a single, consolidated VAT return which is submitted in the country of establishment.
HMRC’s IOSS system is not expected to be operational by 1 July, therefore a GB business may have to register for the IOSS in an EU member state. To do so, at the time of writing, an EU intermediary will be required to assist in registration.
For businesses who sell goods under €150 via a 3rd party Online Marketplace (OMP), such as Amazon, the OMP will be responsible for the collection of the VAT due in the country of destination.
Lastly, for GB sellers of goods over €150 to EU member states where stock is held outside the EU, you will still need to register in the relevant EU member states as appropriate. To read more on the EU VAT e-commerce package, visit the EU website here.
Get in touch
The new VAT rules are far-reaching and will have a wide impact, not only for traders within the EU, but also for non-established businesses (including businesses established in GB) selling goods to EU consumers on a distance sales basis.
EU and non-EU businesses will need to consider the new rules and understand the impact. With only a few weeks to go until the new rules are introduced on 1 July 2021, businesses need to start preparing for these changes now.
If you want to discuss the changes to EU VAT rules in more detail and how they will affect your business, please contact Andy Kirkaldy using the button below.