{"id":12518,"date":"2021-05-17T22:45:54","date_gmt":"2021-05-17T14:45:54","guid":{"rendered":"https:\/\/zhenhub.com\/?p=10980"},"modified":"2022-10-07T18:24:20","modified_gmt":"2022-10-07T10:24:20","slug":"eu-vat-ecommerce-package","status":"publish","type":"post","link":"https:\/\/zhenhub.com\/blog\/eu-vat-ecommerce-package\/","title":{"rendered":"Everything You Need to Know about the July 2021 EU VAT eCommerce package"},"content":{"rendered":"\n

The impact of eCommerce on trade and industry is undeniable. While it hasn\u2019t taken over traditional retail, over 2.14 billion people worldwide will buy goods and services online<\/a> this year. The drastic shifts in consumer trends, bolstered even further by the pandemic, have led international governing bodies to adapt to the changes. And leading the way is the European Union with the introduction of the revised EU VAT eCommerce Package.\u00a0<\/p>\n\n\n\n

The upcoming EU VAT eCommerce package streamlines the taxation process across EU member states. The main goal of the reform is to reduce red tape, minimize instances of VAT fraud, and improve cross-border trade. This article explains the EU VAT eCommerce package, the upcoming changes, and the best ways to adapt to the reform. <\/p>\n\n\n\n

What is the EU VAT eCommerce Package?<\/strong><\/h2>\n\n\n\n

The reforms on the EU VAT have been underway since 2019. These changes in taxation affect telecommunication, broadcasting, and electronic companies. But, by July of this year, reforms will extend to B2C eCommerce sellers and marketplaces.

The 27 member states of the European Union drafted the EU VAT eCommerce package to tackle the complicated taxation process across different member jurisdictions. The new terms end the low-value import VAT taxation and introduce a new VAT filing system for all B2C transactions. These changes will streamline the process and minimizing VAT fraud:\u00a0

\u201cThe European Commission aims at simplifying VAT obligations for companies carrying out cross-border sales of goods or services (mainly online) to final consumers and to ensure that VAT on such supplies is paid correctly to the Member State in which the supply takes place, in line with the principle of taxation in the Member State of destination\u201d<\/em> reads a part of the EU announcements found on their website<\/a>.\u00a0<\/p>\n\n\n\n

What is Changing from the Current VAT Guidelines?<\/strong><\/h2>\n\n\n\n

Introduction of the OSS<\/h3>\n\n\n\n

Two years ago, the European Union introduced the Mini One Stop Shops or MOSS – a system designed to enable eCommerce operations to declare and pay VAT for business-to-consumer transactions. At the time, MOSS only impacted telecommunication, broadcasting, and electronic processes. <\/p>\n\n\n\n

With the EU VAT eCommerce Package, improvements on the MOSS allow more businesses to use the system. This development of MOSS to OSS, One Stop Shops, means that online sellers catering to customers across borders with the EU can use OSS to report their inter-EU sales. It is also a vast improvement from the current process that requires eCommerce businesses to register in each country that passes the distance threshold. <\/p>\n\n\n\n

It is important to note that this system is open for Non-EU sellers doing business with members of the Union. The OSS would provide sales by EU country, VAT % used, and VAT due in such cases. The amount then gets paid to the home country\u2019s tax office.
<\/p>\n\n\n\n

End to \u20ac22 import VAT exemption\u00a0<\/h3>\n\n\n\n

At present, EU and Non-EU eCommerce retailers can ship products directly to consumers within the European Union VAT-free so long as the parcel value is less than \u20ac22. It has been a significant roadblock for many online businesses since filing for VAT is complex and different across various countries. Additionally, it has been a great source of VAT fraud, with sellers undervaluing their imports. <\/p>\n\n\n\n

With the EU VAT eCommerce Package, transactions of up to \u20ac150 are no longer subject to VAT. Consignments above \u20ac150 are due to pay VAT at the point of sale. This reform was supposed to take effect on January 1, 2021. However, delays caused by Brexit moved the implementation to July 2021 – together with the introduction of the new VAT filing system – the OSS.<\/p>\n\n\n\n

Marketplaces Deemed as Supplier\u00a0<\/h3>\n\n\n\n

The EU VAT eCommerce Package also entails the transfer of the responsibilities of the \u201csupplier\u201d to facilitating marketplaces. These marketplaces become liable for collecting, reporting, and remitting collected VAT payments from the buyer to the third-party seller\u2019s home country. <\/p>\n\n\n\n

It is crucial to define a marketplace to understand this provision of the reform truly. According to the EU:<\/p>\n\n\n\n

\u201cA marketplace is considered to facilitate a sale when it participates in any of the following:<\/em><\/p><\/blockquote>\n\n\n\n