The European Union introduces new Value-Added Tax rules for e-commerce from 1 July 2021

From 1 July 2021, the Valued-Added Tax (VAT) rules on cross-border business-to-consumer (B2C) e-commerce activities in the European Union (EU) will change.

According to information from the European Commission, the current EU VAT rules were last updated in 1993 - long before the digital age - and are ill-suited to the needs of businesses, consumers and administrations in an era of cross-border internet shopping. In the meantime, the online shopping boom has transformed retail sales across the world, and accelerated even more sharply during the pandemic.

The new rules will have major impact on Customs as well:

First, VAT will now have to be applied on all goods that are sold online in the EU regardless of their price. The current VAT de minimis threshold of 22 EUR will no longer be applied. Studies and experience have shown that the de minimis exemption is being abused with even goods such as smartphones being declared at a value less than 22 EUR. 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 EU businesses.

Secondly, an electronic portal called the 'Import One Stop Shop' (IOSS) was introduced to facilitate and simplify the declaration and payment of VAT for online sales of goods imported in the EU with a value not exceeding EUR 150. The IOSS will allow non-EU registered e-commerce vendors and marketplaces to easily declare and pay VAT in the EU, and will ensure that the VAT makes its way to the EU Member State in which it is rightfully due. To register in the IOSS, non-EU businesses need to appoint an EU-established intermediary to fulfil their VAT obligations.

For consumers that buy from a non-EU seller or platform that is registered in the IOSS, VAT will, from the 1 July 2021, be included as part of the price that has to be paid to the seller. That means no more calls from Customs or courier services asking for an extra payment when the goods arrive in the buyer's home country.

Special provisions are introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves ('deemed supplier'). In addition, new record keeping requirements are introduced for online marketplaces/platforms facilitating supplies of goods and services, including where such online marketplaces/platform are not a deemed supplier.

Another simplification, known as special arrangements, is envisaged specifically for postal operators and couriers to manage sales done by sellers or marketplaces/platforms that have not registered in and do not use the IOSS. Under this scheme, the VAT due upon import will be collected from the buyer upon delivery of the parcel. The postal service or courier will pay monthly to the relevant authorities the amount of VAT collected during a given calendar month for transactions making use of the special arrangements.

For more information on the new VAT e-commerce rules in the EU and to download different information materials in all EU languages as well as Japanese and Chinese, visit the website of the European Commission: https://ec.europa.eu/vat-ecommerce

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