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Tax Insights August 2020 - New VAT rules for e-commerce (B2C) as from 1 July 2021

Faced with the rapid development of the digital economy, the European Council and the European Commission have adopted new VAT rules for e-commerce. These changes aim to simplify the administrative formalities and to reduce costs for suppliers and service providers operating online. 

The rules will, in principle, enter into force in all EU Member States as from 1 July 2021. We provide you the main changes below. 

1. "MINI ONE-STOP SHOP" EXTENDED TO ALL B2C SERVICES

The MOSS scheme allows suppliers of electronically supplied services (and telecommunication services, radio and television broadcasting services) to private individuals (“B2C”) to account for any local VAT due of the Member State of the customer in a single VAT return in the Member State of establishment of the supplier. 

From 1 July 2021, all services provided to a private individuals established in the European Union can be declared in the Member State of establishment of the service provider via the OSS declaration ("One Stop Shop" instead of MOSS).

2. THE DISTANCE SELLING SCHEME: FOREIGN VAT REGISTRATIONS NO LONGER REQUIRED 

Every single sale to a private individual (or "member of the group of 4") whereby the supplier arranges for the transport of the goods from one EU Member State to the customer in another EU Member State, qualifies as a “distance sale”.

Current legislation 

VAT of the Member State of dispatch of the goods is due until the threshold is exceeded (EUR 35,000 or EUR 100,000 varying per Member State).  

Upon exceeding the threshold in the Member State concerned (or upon earlier voluntary option), VAT of the Member State of arrival of the goods is due. Therefore, the supplier must register for VAT and submit periodic VAT returns in that Member State.
 

As of 1 July 2021

Any "distance sale" will be subject to VAT in the Member State of arrival of the goods (except for start-ups and micro-enterprises not exceeding EUR 10,000 of "distance sales" per year)

The supplier has the option to register for OSS in his Member State of establishment, so that VAT due in the various Member States can be accounted for in a single OSS return

This simplification measure implies a considerable reduction of costs, since it will no longer be necessary to:  

  • check whether the thresholds in the various Member States are exceeded; 
  • register for VAT purposes in each Member State where the threshold has been exceeded (or if opted for) for distance sales;
  • submit periodic VAT returns in the Member States concerned. 

Attention should be paid that the correct VAT rate of the Member State of the customer is applied immediately. 

Supplies from/to the United Kingdom (after the transitional period- Brexit) will be excluded from this scheme.
 

3. DISTANCE SALES OF IMPORTED GOODS: CREATION OF AN OPTIONAL "IMPORT ONE-STOP SHOP"

To date, a VAT exemption of VAT applies for the import of low-value goods below EUR 22. 

From the 1st of July 2021, an optional import scheme for distance selling (IOSS) will be introduced, applicable to consignments up to a value of EUR 150 (excise goods are excluded). 

No import VAT will be levied on such goods, but the VAT due on the onward sale of said goods in the various Member States will have to be paid by the seller via the IOSS return.
 

4. HOW CAN RSM HELP YOU? 

From the 1st of July 2021, you may be able to cancel VAT identification numbers in other EU Member States and limit your VAT compliance costs abroad, in exchange for an (i)OSS registration in your Member State of establishment.

This is therefore the time to re-assess all your VAT registrations, your flows of goods/services and your ERP system in the light of the changes to come. 

RSM is present in all EU Member States (and beyond). Hence, we can help you to reassess the situation and advise you on how to implement these changes wherever needed.
 

If you would like to receive additional information or assistance on this matter, the VAT team of RSM Belgium is at your disposal: [email protected]

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