April 1, 2021

At the beginning of 2020, 1StopVAT announced EU new VAT rules on cross-border business-to-consumer (B2C) e-commerce activities coming into force on 1 July 2021. 

As of today, EU Member States opens voluntary registration on One-Stop-Shop (OSS) and Import One-Stop-Shop (IOSS) portals. 

Therefore, let’s check one more time what is changing from 1 July 2021.

Thresholds. The current thresholds for B2C distance sale of physical goods (35 000 EUR or 100 000 EUR depending on a particular Member State) will be abolished and replaced by a new EU-wide threshold of 10 000 EUR. Distance sales of physical goods below this new EU-wide threshold will remain subject to VAT in the Member State where the seller is established or exempt from VAT if the seller is not found in the EU.

VAT registration. Online sellers facilitating B2C sales will become eligible to register for VAT in only one EU Member State (OSS platform). This will be enough to declare and pay VAT on all distance sales of physical goods within the EU.

Deemed supplier. Businesses operating electronic interfaces, such as marketplaces or platforms (Amazon, eBay, etc.), and facilitating B2C distance sales of physical goods will, in certain situations (upon distance sales of physicals goods with a value not exceeding 150 EUR and imported into EU and/or upon facilitating B2C sales of physical goods in the EU when the seller using the electronic interface is not established in the EU) be deemed for VAT purposes to be the supplier of those goods even though the goods are sold to customers by companies using the marketplace or platform. Consequently, they will have to collect and pay VAT on these deemed sales. Marketplaces/platforms will also become eligible to register for VAT in OSS.

VAT exemption on imported low-value consignments. VAT exemption on imported low-value consignments (low value – up to 22 EUR) will be removed. This means that all physical goods purchased from a third country or third territory sellers and imported into the EU will become subject to import VAT. All sellers not established in the EU and deemed suppliers will be eligible for registration at IOSS platform. If sellers not based in the EU won`t register in the IOSS, VAT will have to be paid by the customer upon importing purchased physical goods into the EU. Therefore, this may lead to a significant drop in such sellers` conversion rate as EU customers are not used to hidden fees or charges during custom clearance at the EU border. 

However, there are two exemptions from registering and using IOSS for sellers not established in the EU:

  1. Third country or third territory seller sells physical goods to the same buyer and the value of these goods, if they are shipped in one package, amounts to more than 150 EUR. In this case, the goods will be taxed upon the importation of purchased physical goods into the EU, and import VAT will have to be paid by the customer in the EU; and/or
  2. Third country or third territory seller facilitates sales of goods through a marketplace or a platform. In this case, the marketplace or a platform will be a deemed suppliers and will become responsible for the payment of import VAT. However, if the value of these physical goods sold to EU customers amounts to more than 150 EUR and if these physical goods are shipped in one package, import VAT will have to be paid by the customer in the EU.

Please note that these changes are effective on B2C sales only.

Ensure that your business is ready to comply with new VAT rules for e-commerce in EU and contact us if any doubt.

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