The European Union e-commerce VAT package will take place on July 1, 2021. Therefore, businesses will have to deal with both the changes related to Brexit and the impact of the technologies in cross-border sales - two new sets of rules for VAT reporting in 2021.
From July 1, 2021, the EU will introduce new rules that will extend the Mini One Stop Shop (MOSS) currently available for accounting for VAT on B2C sales of telecommunications, radio, and television services (TBES) to all B2C supplies of services where VAT is due in a Member State other than where the supplier is established and for intra-community B2C supplies of goods. This system, known as the "One Stop Shop" (OSS), was due to come into force on January 1, 2021.
The current distance selling thresholds will be abolished and all intra-Community supplies of TBES B2C services, as well as intra-Community distance selling of goods, will operate under the same threshold of € 10,000 limit. When this limit is exceeded, VAT will be due in the Member State of supply, regardless of the level of sales in that country. It is important to note that this threshold applies to businesses established in the EU and will not apply to UK businesses.
Any VAT due can be returned via a single VAT return, submitted in the Member State of identification - the country in which the business is registered for OSS. Any company established in the EU will use the country in which it operates as the Member State of identification. If there is no business establishment in the EU, then a Member State can be chosen. Provisions also apply to non-EU companies that provide services in the form of the non-Union OSS scheme. The OSS scheme is not compulsory - businesses can choose to be registered in all Member States where VAT is due.
The shipment of goods from physical locations, such as warehouses in the EU, will continue to be treated as distance selling. If the thresholds are exceeded, VAT will be due in the Member State of supply.
Therefore, OSS will be available for all sales of goods, regardless of their value. VAT will be returned in the Member State of identification at the rate in force in the country where VAT is due - the Member State of consumption. Any VAT due will be paid to the Member State of identification, and OSS declarations will have to be submitted.
Goods imported from non-EU countries or territories to EU customers up to an intrinsic value of €150 will be covered by an import regime, such as that to be implemented in the UK from January 1, 2021. This import regime comes with the abolition of the current VAT exemption for goods in small consignments up to a value of 22 euros. However, if the value of the goods exceeds €150, VAT cannot be accounted for under the IOSS scheme and a full customs declaration will be required.
Goods imported from territories or third countries in batches with an intrinsic value of less than €150 using an electronic interface such as a marketplace, platform, or similar means, will also be treated differently. For imports not exceeding €150, instead of the import VAT, the marketplace will charge the VAT to the customer at the point of sale and account for it instead of the seller.
Until the application of the new rules on July 1, 2021, Member States must transpose into their national legislation the new rules of the VAT Directive that is already in force, something that some Member States have already done. Although this has not yet been confirmed, many believe that the OSS could be delayed further, as the Netherlands and Germany are uncertain about the preparation for the start date of July 2021.
For British companies, Brexit makes things particularly complicated. After the implementation of OSS, British companies can benefit from the changes to the e-commerce package. However, during the 6-month period in 2021, registrations and tax representatives may be required for a relatively short period of time. It is essential that companies plan their supply chain taking into account all the changes ahead.