Comprehensive EU VAT rules apply to cross-border business-to-consumer (B2C) e-commerce supplies of goods and services, both within the EU and from outside it. If you sell anything to EU consumers via the internet, read on.

The general principle is that all supplies to EU residents are now subject to EU VAT, with no de minimis exceptions. The aim is equal VAT for EU and non-EU suppliers. And EU consumers may avoid VAT surprises on imported purchases.

For B2B (business-to-business) supplies by a non-EU supplier, the EU customer can report the transactions instead of the non-EU supplier, using the “reverse charge” (self-billing) mechanism.

For B2C (business to consumer) supplies by an EU supplier, new “Distance” Rules apply to cross border intra-EU transactions.

For B2C transactions by a non-EU supplier, VAT is payable at the rate applying in the destination country of the customer. This can be done by registering for EU VAT purposes in any of the following ways:

(1) registering in the destination country(ies), or

(2) registering on the EU-wide One-Stop Shop (OSS), or

(3) registering on the EU-wide Import One Stop Shop (IOSS) for goods imported into the VAT at a value of up to EUR150, and/or

(4) letting an electronic interface i.e. online marketplace collect the EU VAT, or

(5) not popular – letting the deliverer or local post office collect the EU VAT from the customer.

Detailed rules apply to each possibility.

Following is an overview mainly from the EU Commission (https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en).

Who is concerned?

Everyone in the e-commerce supply chain is affected, from online sellers and marketplaces/platforms both inside and outside the EU, to postal operators and couriers, customs and tax administrations, right through to consumers.

Intra EU Distance Sales:

Since July 1, 2021, there is a EU-wide threshold of EUR 10,000 for intra-EU B2C “distance sales” of goods. Below this EUR 10 000 threshold, distance sales of goods within the EU may generally remain reportable and subject to VAT at the rate applicable in the EU country where the taxable person is established, rather than the VAT rate in the customer’s country.

This also applies to the supplies of TBE (telecommunications, broadcasting and electronic) services.

This does not apply to goods subject to excise duties, such as liquor and tobacco.

The EU One-Stop Shop (OSS):

Online sellers, including online marketplaces/platformscan register on the One-Stop Shop (OSS) in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU.

The OSS may therefore avoid the need for a supplier to register in all 27 EU countries.

There are two types of OSS – the “Union scheme” and the “Non-Union scheme”.

What is the Union OSS for?

The Union OSS is an electronic portal which apparently simplifies up to 95% of VAT obligations for online sellers and electronic interfaces throughout the EU, as it allows them to:

• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services;
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return;
• Work with the tax administration of their own Member State and in their own language, even if their sales are cross-border.

Who can use the Union OSS and for which supplies?

1) A taxable person established in the EU can use the Union OSS for:

• Supplies of B2C services taking place in a Member State in which he is not established;
• Distance sales of goods within the EU.

2) A taxable person not established in the EU for:

• Distance sales of goods within the EU .

3) An electronic interface (established in the EU or outside the EU) facilitating supplies of goods (deemed supplier) for:

• Distance sales of goods within the EU;
• Certain domestic supplies of goods.

How to register for the OSS:

Each EU Member State offers an online OSS portal which businesses can use for transactions.

This single registration will be valid for all eligible supplies made by online sellers (including electronic interfaces) or supplies facilitated by electronic interfaces.

What do you need to do if you use the OSS?

Online sellers who are not electronic interfaces must:

• apply the VAT rate of the Member State where the goods are dispatched to or where the services are supplied;
• collect VAT from the buyer on intra-EU distance sales of goods or on supplies of services;
• submit an electronic quarterly VAT return via the OSS portal of the Member State where you are registered for OSS;
• make a quarterly payment of VAT declared in the VAT return to the Member State where you are registered for OSS;
• keep records of all eligible OSS sales it facilitates over 10 years.

The Non-Union OSS

From 1 July 2021, the non-Union OSS scheme can be used by (online) sellers not established in the EU for all B2C supplies of services taking place in the EU made by these non-EU online sellers.

Examples of supplies of services to customers (a non-exhaustive list) that could be reported under the non-Union scheme are:

• Accommodation services carried out by non-established taxable persons;
• Admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events; such as fairs and exhibitions;
• Transport services;
• Services of valuation and work on movable tangible property;
• Ancillary transport activities such as loading, unloading, handling or similar activities;
• Services connected to immovable property;
• Hiring of means of transport;
• Supply of restaurant and catering services for consumption on board ships, aircraft or trains etc.

The EU Import One-Stop Shop (IOSS):

This is not the same as the One-Stop Shop (OSS).

The Import One-Stop Shop (IOSS) allows suppliers and electronic interfaces selling imported goods to buyers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT at the moment the goods are imported into the EU.

The IOSS covers the sale of goods from a distance that are:

• dispatched or transported from outside of the EU at the time they are sold;
• dispatched or transported in consignments with a value not exceeding a total of EUR 150 (low value goods) even if the order contains more than one item;
• not subject to excise duties (typically applied to alcohol or tobacco products).

How does the IOSS work?

Sellers registered in the IOSS need to apply VAT when selling goods destined for a buyer in an EU Member State. The VAT rate is the one applicable in the EU Member State where the goods are to be delivered. Alternatively, an Electronic Interface (marketplace) registered in the IOSS VAT may pay the VAT due.

How can you register for the IOSS?

A non-EU supplier of goods valued up to EUR 150 can register businesses on the IOSS portal of any EU Member State. If businesses are not based in the EU, they will normally need to appoint an EU-established intermediary (see beow) to fulfil their VAT obligations under IOSS. The IOSS registration is valid for all distance sales of imported goods to buyers in the EU.

What you need to do if you use the IOSS?

• provide the information required for customs clearance in the EU, including the IOSS VAT identification number to the person declaring the goods at the EU border;
• show/display the amount of VAT to be paid by the buyer in the EU, at the latest when the ordering process is finalised;
• ensure the collection of VAT from the buyer on the supply of all eligible goods with final destination in an EU Member State;
• make sure that eligible goods are shipped in consignments not exceeding the EUR 150 threshold;
• to the extent possible, show on the invoice the price paid by the buyer in EUR;
• submit an electronic monthly VAT return via the IOSS portal of the Member State where you are identified for IOSS;
• make a monthly payment of the VAT declared in the VAT return to the Member State where you are identified for IOSS;
• keep records of all eligible IOSS sales and/or sales facilitated over 10 years;

You do not need to charge VAT on sales of goods in the following circumstances:

• You sell several goods to the same buyer, and these goods are shipped in a package amounting to more than EUR 150. These goods will be taxed upon importation in the EU Member State;
• Your distance sales of goods are facilitated by an electronic interface such as a marketplace or platforms. In this situation, the electronic interface is responsible for the VAT due.

The EU Intermediary

The EU-established Intermediary shares responsibility for IOSS return submissions and VAT payments (according to Avalara)..

The decision to impose guarantees on Intermediaries is left to the member states where the Intermediary is resident and registered. It is expected it will reflect the EU VAT Fiscal Representative country rules.

An Intermediary should be registered with the tax authorities of their country of establishment to obtain their unique identification number to use with customs clearance processes. The Intermediary also registers the name of all sellers / marketplaces they represent with their home tax office, and will receive in return a IOSS VAT identification number for each sellers.

Online electronic interfaces:

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.

What are electronic interfaces?

An electronic interface (EI) should be understood as a broad concept. An EI could include a website, portal, gateway, marketplace, platform, application program interface (API), etc.

Electronic interfaces such as online marketplaces/platforms may need to:

• Become “deemed suppliers”, and
• Have certain record keeping obligations.

You are considered a deemed supplier if you facilitate:

• Distance sales of goods imported to the EU with a value not exceeding EUR 150; and/or
• Supplies of goods to customers in the EU, irrespective of their value, when the underlying supplier/seller is not established in the EU (both domestic supplies and distance sales within the EU are covered).

To declare and pay the VAT due in other Member States, online marketplaces/platforms will be able to easily register in special electronic portals – OSS or IOSS (see herein).

The electronic interface should not become a deemed supplier for the following transactions:

• Goods in consignments whose value is exceeding EUR 150 imported into the EU, irrespective of where the actual supplier/seller is established;
• Goods supplied to customers in the EU, irrespective of their value, in case the underlying supplier/seller is established in the EU. The supplier should have its own EU VAT registration.

The result of the above-described deemed supplier model is that the electronic interface is treated for VAT purposes as if it is the actual supplier of the goods and will be liable to account for VAT on these sales. In other words, the electronic interface facilitating the sale is considered to have received and supplied the goods. This is an EU VAT procedural matter, it should not affect the legal ownership position or insurance position for the goods.

Online marketplaces/platforms will need to keep records for the transactions they facilitate, irrespective if they become deemed suppliers or not (Articles 54(1), 54C(2)63C of the VAT Implementing Regulation or 242, 242a of the VAT Directive) . Such records should be kept for 10 years and made available electronically on request by Member State(s).

EU VAT fiscal representative countries:

Many EU countries may require fiscal representatives for non-EU established businesses with local EU VAT registrations. Countries vary on the requirements based on location of the taxpayer and business model, so please consider this a first-level indication. The EU plans to sign mutual tax assistance cooperation agreements with non-member states that may eliminate the need for fiscal representation for businesses coming into the EU from the co-signature states. So far, it has only signed such as deal with Norway.

Fiscal representative generally needed:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Estonia, France, Greece, Hungary, Italy, Lithuania, Luxembourg (may require tax office cash deposit), Malta, Netherlands (only import licenses), Poland, Portugal, Romania, Slovenia, Spain, Sweden.

Fiscal representative not generally needed: Czech Republic, Ireland, Latvia, Slovakia.

Comments:

The IOSS and OSS generally won’t apply to sellers holding a goods inventory in one EU country for supply to other EU countries. They must register in each EU country where they hold inventory. This includes selling using the Amazon FBA program. Otherwise, double taxation may occur in the import country and the customer’s country.

In other cases, the IOSS and OSS facilitate VAT registration in just one EU country out of 27.

To sum up, EU and non-EU businesses supplying goods and services to EU consumers must decide how, not whether, to pay EU VAT arising.

They should also check whether they owe corporate income tax in the EU and elsewhere under existing tax laws and tax treaties or under the OECD initiatives – multilateral instrument, Two Pillar measures, and so forth. If so, the availability of double (or triple) tax relief should be reviewed.

Next Steps:
Please contact us if you need to discuss the above or any other business matter.

Always consult experienced professional advisors in each country concerned – we can help arrange this.

[email protected]

© November 17, 2024