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VAT: New EU e-commerce rules

The new VAT e-commerce rules bring a simple and uniform set of VAT rules for all businesses engaged in cross-border e-commerce (especially online sellers,  marketplaces/platforms as well as operators, couriers, customs, tax administrations and consumers) either from inside or outside the EU.

The main changes as of 1 July 2021 are:

  • End to VAT exemption on importation: With the implementation of the new VAT rules, all goods imported to the EU and services are now subject to VAT.
  • New EU-wide threshold: It is defined that the EU-wide threshold for distance sales of goods is EUR 10,000. The VAT must be paid in the Member State where the goods are delivered.
  • Achievement of uniformity of the VAT registration: The electronic portal One-Stop Shop (OSS) simplifies up to 95% of VAT obligations for online sellers and electronic interfaces throughout the EU. With the help of the One Stop Shop the online retailer can notify and pay VAT in the One Stop Shop for all of their EU sales via a quarterly declaration. For non-EU sellers is the registration in an analogous Import One Stop Shop possible that allow to ensure the correct amount of VAT in the Member State in which it is finally due.

These new rules will:

  • ensure that VAT is paid where consumption of goods and services takes place;
  • create a uniform and transparent VAT system for cross-border supplies of goods and services;
  • re-establish fair competition between European and foreign e-commerce market players, as well as between e-commerce and traditional shops;
  • offer businesses a simple and uniform system to declare and pay their VAT in the EU via the VAT One Stop Shop/Import One Stop Shop.

Similar reforms have been put in place and are working well in other jurisdictions such as Norway, Australia and New Zealand.

Full details including explanatory notes on VAT e-commerce rules and the Council Directive (EU) 2017/2455, the Council Directive (EU) 2019/1995 and the Council Implementing Regulation (EU) 2019/2026 are available here.