European Union (EU) – years after establishment – still undertakes measures to protect its internal single market. Varietate Concordia (from Latin, united in diversity), the 27 Member States (MS) finally introduced the new Value Added Tax (VAT) rules for e- commerce. Such an initiative dates back in 2016, the year when the European Commission stressed out the Digital Single Market Strategy for Europe (DSM Strategy) as part of the VAT action plan. One year later, an ad hoc VAT package for e-commerce was adopted. The purpose was to introduce it gradually. Nevertheless, the instantaneous blooming of e-commerce caused by the Covid-19 pandemic, pushed the MS to introduce in July 2021 the new changed VAT rules on e- commerce. Rules find application on all cross- border business-to consumer (B2C) e- commerce activities. Such an initiative has been welcomed just by the fact that the EU VAT rules were last amended in 1993, well ahead of the digital age.
Since 1 July 2021, each actor participating in the e-commerce chain is affected. Starting with the online sellers, market platforms inside and outside the Union, postal operators and couriers, customs and tax administrations, and ending to the final consumers. The establishment of such rules was made to strengthen the internal market by overcoming any obstacle getting in the way of cross- border online sales. To that end, the MS decided to modernize the VAT rules, to simplify VAT obligations and to encourage fairness in business doing by all the European and non- European marketers.
This is how it will shall work:. Each online seller (operating in market platforms) can file a single registration in the electronic portal business of the Unions, the One-Stop Shop (OSS) – to accede with his VAT obligations on e- commerce. The registration will be valid for all his declarations and payments of VAT on all the supply of goods and services to buyers within the EU. Moreover, it will allow the seller him the opportunity to interact with the tax administration of itshis own MS- . mMaking it easier to perform with all the obligations in the language and the legal requirements he understands, even when the sales are of a cross- border nature.
The wide EU threshold of EUR 10. 000 is the first novelty. Any cross- border seller remains subject to the VAT of itshis MS of establishment. This adjustment was made to support micro- businesses. On this ground, the cross- border sellers not exceeding the EUR 10. 000 threshold will be treated the same (for the VAT obligations) as the domestic sellers.
Another new concept is the ‘deemed supplier’. The latter might be any person facilitating the selling process by providing his electronic platforms, such as: a marketplace or e- portals. As a result – and only for the VAT purposes – ithe is treated as the factual supplier of the goods. This person/company buys goods from the prime supplier and sells them afterwards to the customer. Supplementary to this, new record keeping requirements are introduced for both the primary and deemed suppliers. All this provision was added to make the collection of VAT more practical.
The 2021’s adjustments ejected the exemption on VAT for all the imported goods from third territories or third countries. Before 2021 goods not exceeding EUR 22 were not subject to VAT. On the other hand, to boost their sales a special system is introduced. The Import One Stop Shop (IOSS) is an innovation created to simplify the declaration and payment of VAT added on them and any other goods with a value not exceeding EUR 150.
To that extent, suppliers of imported goods collect, declare and pay the VAT to the tax administration. On the other hand – the buyer – is charged only at the time of the final purchase- . differently from as it was before, where the buyer used to pay the VAT at the moment goods were imported into the EU.
The simplified scheme finds application in the following situations:
- . In the first scenario, the VAT is not charged to the supplier when the goods do not exceed the threshold of EUR 150, and are shipped to the same buyer.
- The second scenario is when the distance sale of goods is facilitated by a deemed supplier.
As previously mentioned, whoever puts into service his electronic platform is now subject to the VAT.
All these adjustments were made to open doors for a new European market imposed by the rapid growth of e- commerce. Digitalization should benefit all. To the buyers – for ordering easier and being more protected; to the sellers – for competing in a fairer fiscal environment, and to the MS – for increasing the public revenues by lowering any possible scam.