The European Union (EU) will adopt new value-added tax (VAT) rules for cross-border e-commerce activities between businesses and consumers (B2C) from July 1, 2021, the World Customs Organization reported.
According to insights, the current EU VAT rules were last updated in 1993, long before the digital age, and are not adapted to the needs of businesses, consumers and governments in this era of cross-border online shopping. Added to this is the fact that the rise of online shopping has transformed retail sales around the world and has accelerated even further during the pandemic.
For this reason, The European Commission will adopt a tax declaration system that is increasingly simpler for digital marketplaces, reducing its administrative burden and “creating the foundations to address the growth of e-commerce within the EU”.
In this regard, the WCO indicated that the new rules will have the following: impact on customs:
En First, VAT will now have to cover all products sold online in the EU regardless of their price. The current de minimis VAT threshold of €22 will no longer apply. Studies and experience have shown that the de minimis exemption is being abused, even with goods such as smartphones declared to be worth less than €22. The new rule means that from 1 July 2021 VAT will have to be charged on all goods entering the EU, ensuring a level playing field for businesses in the community.
En second place, the new regulation introduces the Import One-Stop Shop (IOSS) to facilitate and simplify the declaration and payment of VAT on online sales of goods imported into the EU with a value of no more than €150. The measure will allow EU-registered e-commerce marketplaces and suppliers to easily declare and pay VAT and will ensure that this tax reaches the EU Member State where it is rightfully due. To register for the IOSS, non-EU businesses must appoint an intermediary established in the EU to fulfil their VAT obligations.
Thus, consumers Buyers who buy from a non-EU seller or platform that is registered with the IOSS will have to pay VAT from 1 July 2021 as part of the price payable to the seller. This means no more calls from customs or courier services requesting additional payment when the goods arrive in the buyer's country.
The new EU regulations introduce special provisions which, for VAT purposes, online marketplaces/platforms are deemed to be suppliers of goods as if they had received and supplied the goods themselves ('deemed supplier'). In addition, new record-keeping requirements are introduced for online marketplaces/platforms that facilitate the supply of goods and services, even where such online marketplaces or platforms are not a deemed supplier.
Another simplification, known as Special Agreements, is introduced for the postal operators and couriers that manage sales made by sellers or marketplaces/platforms that have not registered and do not use the IOSS. Under this scheme, the VAT due at the time of import will be collected from the buyer at the time of delivery of the package. The postal or courier service will pay monthly to the competent authorities the amount of VAT collected during a calendar month, determined by the transactions that fall under the special regimes.
For more information on the new EU VAT rules for e-commerce, please visit the European Commission website: https://ec.europa.eu/vat-ecommerce
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