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New EU VAT Rules Apply as of 1 July 2021

The most relevant measures of the VAT Ecommerce Package are:

  1. Removal of the existing ‘Distance Selling Thresholds’ and extension of the VAT One Stop Shop system to ecommerce distance selling.
  2. Removal of the € 22 low-value import VAT exemption and introduction of the Import One Stop Shop (IOSS) system. Marketplaces become the deemed supplier and VAT collector in certain cases.

As of 1 April 2021, VAT registration to the One-Stop Shop (OSS) and the parallel Import One-Stop Shop (IOSS) has been possible, but the system will be operational as of 1 July 2021. The (I)OSS aims to simplify the VAT obligations for online sellers and electronic interfaces (marketplaces), allowing for electronic VAT registration in just one Member State for all intra-EU distance sales and to declare and pay VAT in a single electronic quarterly return. Furthermore, special provisions and new record keeping requirements are introduced for marketplaces/platforms facilitating the supply of goods. However, the use of OSS is optional and does not provide VAT registration relief for sellers holding stock in multiple Member States in order to be as close as possible to the consumers. In this regard, e-merchants still have to maintain their foreign VAT registrations in every EU country where they are sending or holding stock. To support this measure, the European Commission will publish a new legislative initiative to introduce a Single VAT ID.

This news comes from from our European colleagues, Ecommerce Europe, which has published a Position Paper advocating for prioritising the proposal and extending the OSS to all transactions by remote sellers, including pan-EU inventory storage. Ecommerce Europe is closely monitoring the work of the European Commission and the national administrations in ensuring that all IT portals are operational in time and that all European companies are aware of the important changes that will affect them.

Meanwhile, Our Ecommerce Europe colleagues point out that the G20 Finance Ministers and Central Bank Governors (FMCBG) held a meeting at the beginning of July (see our Newsletter of last month) to further the agreement OECD/G20 Inclusive Framework on international tax reform. The two-pillar tax reform package on taxing rights redistribution and a minimum tax solution aims to address the tax challenges arising from the digitalisation of the economy. Ecommerce Europe has welcomed the global tax agreement, but is concerned about the European Commission’s plans to propose an EU digital levy at this crucial moment of the global negotiations. EFSA is involved in a forthcoming conference in SA on digital taxation (see below).

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Alastair Tempest

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