9 January, 2018

New European Union rules for VAT on cross-border e-commerce

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It is expected that these measures will benefit businesses, as they will reduce substantially cross – border VAT compliance costs; EU businesses will no longer have to compete against non – EU businesses that are not charging VAT and Member States will gain as well through an increase in VAT revenues.

An e – commerce package was approved on December 05, 2017 at a meeting of ECOFIN. It is expected to be gradually implemented by 2021.


With this new package, the EU is taking action to address the following three main problems: (i) the need to reduce VAT compliance costs for Small – sized entities (SME); (ii) the high rates of non – compliance which implies that EU sellers (both online and traditional businesses) are at a severe disadvantage to non – EU sellers; and (iii) Member States are loosing at least EUR 5 billion annually in VAT revenues, mainly deriving from VAT non – compliance.


This proposal also aims at modernising VAT for cross – border e – commerce in the context of the Strategy for the EU Digital Single Market where the free movement of goods, persons, services, capital and data is guaranteed.


✔ A set of rules will be introduced as from 2019 to help micro – businesses and small – sized entities within the EU by simplifying the rules applying to Telecommunications, broadcasting and electronic services. Companies below the threshold of 10,000.00 € per year will be allowed to apply the rules of their own country on cross border B2C supplies. Besides, evidence of the customer’s location will be reduced when cross border B2C supplies are below 100,000.00 € per year.


✔ The One Stop Shop for electronic services currently known as MOSS will be extended to online supplies of goods and cross border services to end consumers. It is expected that, in 2021, all cross border B2C sales will be declared through a tax portal in one Member State. This part of the legislative package aims at reducing the existing fraud in many B2C cross border goods supplies subject to the intra – EU distance sales regime.


✔ Marketplaces and electronic platforms will be liable for VAT on certain B2C sales which they facilitate. This rule aims at preventing fraud mechanisms that derive from the import of goods from distance sales entering the EU VAT free through such marketplaces.


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