In the wake of Brexit, the world has been hit by the Covid19 Pandemic, resulting in a paradigm shift in the way in which trading transactions were carried out. Physical visits to the stores have been replaced by On-line Virtual Stores, and corporates that are in this business have witnessed exponential growth in the past two years. From the perspective of Simplification, Fairness, and increased Revenue Generation, various changes have been introduced in the EU VAT, the “VAT eCommerce Package” which would affect B2C transactions and take effect from July 1, 2021. These changes have been summarized below:
1. VAT Registration Threshold
Hitherto, national VAT registration thresholds are applied for each country in the EU. If a company from outside the EU is ‘distance selling’ below these thresholds, it would not be necessary for that company to register under VAT. These country-specific multiple distance-selling thresholds for goods have been abolished and a single threshold of 10,000 Euros is being adopted. This would apply to all distance sellers selling their products within the EU countries (excluding the seller’s country of establishment), vide their website, or an online marketplace.
2. Extension of “MOSS”
The concept of ‘MOSS’, or Mini One Stop Shop, by opting for which, a business can report sales for all EU countries vide a single quarterly return made to one EU member-state, was applicable only for businesses engaged in the supply of telecommunications, broadcasting and electronically supplied services to non-taxable customers, generally private consumers, in the EU. Effective July 1, 2021, by virtue of the new ‘One Stop Shop’ scheme, the above facility has been extended to:
- All B2C Services supplied to customers in EU.
- Distance Sale of Goods within the EU (Intra-community); and
- Certain Domestic Supplies facilitated by On-line Market Places (‘deemed suppliers’).
The above reform results in a considerable reduction of the compliance requirements for the above businesses since they need to file a VAT declaration and exchange information only with one Tax Authority of the member state in which they are registered.
3. Low-Value Imports
Hitherto, online sales of goods, with a value below 22 Euros, made to EU customers (whether by sellers based out of EU or otherwise), were not liable to import VAT. On July 1, 2021, all imports into the EU from non-EU countries would be subject to Import VAT, regardless of the value.
4. Import One Stop Shop (“I-OSS”) for consignments below 150 Euros
The “I-OSS” is similar to the “OSS” discussed under point 1 above. It is a portal in which suppliers and electronic interfaces affecting distance sales of imported goods to EU customers can get registered, declare, and remit Import VAT to the authorities, thereby doing away with the requirement of the buyer to pay VAT at the point of Import. Instead, the VAT would become payable at the Point of Sale. The “IOSS” registration would be in just one EU State and a quarterly return would need to be filed in the EU State where the business is registered. “I-OSS” is optional and applies only to imported goods with a value of up to 150 Euros.
5. Special Arrangements for VAT collection
Under this alternative, the Import VAT can be collected from the final customer before, or, at the moment of delivery by means of “Special Arrangements” with the postal authorities, courier company, or customs agent. So, the seller does not charge VAT at the Point of Sale. However, this scheme is also applicable only for goods with a value of up to 150 Euros.
6. On-line Market Places (“OMP”)
This is a ‘deeming provision’. OMPs that facilitate intra-community distance sale of goods to B2C EU customers are deemed to be the supplier of the goods, the sale of which they have facilitated, and hence, would need to collect VAT on such transactions. The above provision applies only for transactions up to 150 Euros. However, the value threshold does not apply when the actual seller is not established in the EU. The above provision will not apply if the transaction exceeds 150 Euros, or the supplier is established in the EU. Certain record-keeping obligations have also been introduced for the OMPs from this perspective.