The new VAT rules for intra-Community trade in goods with European consumers (B2C sales) come into force on 1 July 2021. From this date, all sales will be subject to the VAT of the country of arrival of the goods (there is no longer any threshold applicable except for microenterprises). In order to avoid having to register in all European countries, e-traders will be able to use the One-Stop-Shop (OSS) where they can declare and pay the VAT due in other Member States.
A single "European VAT return", so to speak.
The European Commission talks about a major step forward in administrative simplification.
Intra-Community distance selling of goods from a single country
You sell goods online that are then shipped to your European customers from a warehouse in your country. You will now be able to use the OSS one-stop shop to declare and pay the VAT due in other European countries.
A business that decides to use the OSS will have to :
- Apply the VAT rate of the country to which the goods are shipped;
- Collect the VAT from the buyer;
- Submit a quarterly electronic special VAT return;
- Make quarterly VAT payments;
- Keep records of all eligible OSS sales for 10 years.
The 'administrative simplification' imagined by the European Commission for businesses will no longer consist of filing a single VAT return in the country of establishment ..... but two: an ordinary VAT return (for all sales not covered by the new scheme) and a special OSS VAT return (for intra-Community distance sales). And each VAT return will of course follow its own regime in terms of periodicity, filing deadline, data to be included, how to correct them, how long they are to be kept, etc. Nothing changes, however, for your national deliveries. They will still have to be included in your ordinary VAT return.
Intra-EU distance selling of goods from multiple countries
Some e-traders choose to move part of their stock to another European country in order to respond more quickly to consumer demand. When they sell their goods through an electronic interface (marketplace, platform, etc.), they sometimes have no choice: it is Amazon (or its equivalent) that decides to move all or part of the company's stock from one warehouse to another without even notifying it.
In this situation, the e-seller will have to continue registering for VAT purpose in each country in which its goods are stored. For this business, the "administrative simplification" will now consist of filing three VAT returns: two VAT returns in its country of residence (the ordinary VAT return and the special OSS VAT return) and one VAT return in each European country where its stock is located.
Extra-Community Distance selling of goods
You sell goods that are transported directly from outside the EU to your private European customer.
This is the technique known as dropshipping. It involves selling products to customers using the services of a third party who stores and manages the stock and ships the orders. Dropshipping business owners focus on the branding, marketing and customer relationship management of their business, while a third party manages the logistics operations on their behalf.
For sales of imported goods up to a value of €150, the e-seller may opt to use a new single window at import: the IOSS window or alternatively the special system provided for postal operators and carriers.
If the sale is facilitated by an electronic interface (marketplace, platform), the latter will be considered as the seller and will be liable for the payment of VAT. In this case, the e-trader will not have to pay VAT on his sale.
And if the value of the parcel exceeds €150, it will be the end customer who will have to pay the VAT on his purchase and possibly some customs clearance costs invoiced by the carrier of the goods.
To keep in mind
The European Commission welcomes its plan, which it says will simplify the VAT obligations of sellers of goods to consumers across the EU by up to 95%.
Will OSS really facilitate intra-EU trade and VAT reporting? From a simple reading of the legislative texts, we can already conclude that the European Commission is evolving in a parallel universe to that of European businesses. The new VAT regime, far from simplifying the life of businesses, will on the contrary become very quickly unmanageable for many e-traders.
EU Commission fails to point out that the 2017 VAT Directive introducing the new regime has already had to be urgently addressed by a "remedial" directive in 2019 and four implementing regulations. The European Commission itself has even produced an explanatory note of more than 113 pages (!) in an attempt to explain the new system. In short, a veritable inflation of legislative and administrative texts with sometimes Kafkaesque situations.
For example, an e-seller may potentially have to file three VAT returns in his country of residence: an ordinary VAT return (for all sales not covered by the new regime), a special quarterly OSS return (for his intra-Community distance sales) and a special monthly IOSS VAT return (for his distance sales of imported goods). He will also have to file a VAT return in each European country of import and in each European country where he has part of his stock. Not to mention the special VAT rules when the sale is facilitated by an electronic interface.
Did you say simplification?