Malta: VAT and cross-border sales of goods and services
Malta: VAT and cross-border sales of goods and services
A set of legal notices (published earlier in 2020) amended the value added tax (VAT) rules regarding the treatment of cross-border sales of goods and services to final consumers.
The new VAT rules also introduce certain provisions for taxable persons facilitating supplies of goods or services made by other taxable persons using an electronic interface such as a marketplace, platform, portal or similar means.
- The new rules extend the scope of the Mini One Stop Shop (MOSS) scheme currently applicable to business-to-consumer (B2C) supplies of telecommunications, broadcasting, and electronic services to a One-Stop-Shop scheme that covers all types of B2C services as well as to intra-Community distance sales of goods.
- Complementing the OSS, an Import One Stop Shop Scheme (I-OSS) will be introduced 1 July 2021 with respect to remote sales of goods imported from outside the EU together with a special arrangement for logistics companies assisting with these sales.
The changes were set to be effective beginning 1 January 2021. However, the European Commission in May 2020 proposed to postpone the introduction of the new e-commerce VAT rules by six months. Once adopted by the EU Council, the rules will apply as of 1 July 2021 instead of 1 January 2021.
Remote sales of goods
Under current VAT rules, the sale of goods to private consumers transported from Malta to another EU Member State is subject to the VAT rules of the other EU Member State unless the remote sales threshold is not exceeded, in which case Maltese VAT rules apply to the remote sale. From a practical perspective, remote sales thresholds and VAT compliance obligations differ across EU Member States, meaning that over the years, operators engaged in B2C intra-Community sale of goods have had to face additional complications and increased VAT compliance costs.
As a result of the 2021 changes, intra-Community distance sales provided by non-EU operators will be subject to the VAT rules of the EU Member State where the transport ends. On the other hand, a €10,000 threshold will apply to B2C operators established in the EU. Once EU operators exceed this threshold, the intra-Community remote sale will be deemed taking place in the EU Member State where the transport of the goods ends. To ease the additional compliance burden associated with the broader application of the distance sales regime, both EU and non-EU operators may opt for the so-called OSS regime through which, operators engaged in intra-Community distance sales will be able to remit VAT due in other EU Members States by means of one return (the OSS Return).
OSS also applicable to B2C services in EU Member States (other than where the supplier is established)
With effect from 1 July 2021, businesses registered for VAT in multiple jurisdiction as a result of B2C supplies of services taking place outside the EU Member States where they are establishment will no longer be required to retain these multiple VAT registrations and instead can opt for the OSS regime.
Businesses expected to be affected by this change include businesses registered for VAT in multiple jurisdictions as a result of (1) hiring of means of transport, (2) supply of transport services, and (3) supply of services connected with immovable property, among others.
Remote sale of goods imported from outside the EU
With effect from 1 July 2021, the concept of remote sales will be broadened to apply to B2C sale of goods transported from outside the EU made by EU or non-EU operators. Currently, an exemption applies to the importation of goods with a consignment value of up to €22. As a result of the 2021 changes, the small-value consignment VAT exemption will be repealed and instead the following rules will apply.
Import One Stop Shop (I-OSS) scheme
Operators engaged in remote sales of imported goods with intrinsic consignment value of not more €150 will have the option to register under the Import One-Stop-Shop (I-OSS) scheme.
Operators have the option to appoint an “intermediary” to register under the I-OSS on their behalf. As long as the I-OSS scheme can be availed of and is opted for, VAT will be charged by the operator (or the intermediary appointed by the operator) at the point of sale to EU customer. No VAT will be charged by the customs authorities at the point of importation. The operator or intermediary will then be required to remit the VAT collected to the EU Member State of importation together with the I-OSS Return.
The I-OSS is much less beneficial than the Community OSS scheme because it is only applicable to consignments of a value not more than €150 and requires monthly VAT reporting. That said, non-EU operators may explore opportunities to set up a business within the EU in order to qualify under the Community OSS scheme.
Special arrangement for importation of goods with intrinsic value of not more than €150
Where the I-OSS is not or cannot be availed of, import VAT on remote sales of goods imported from outside the EU may be collected by the customs declarant including postal operators, courier firms, and customs agents. The use of postal operators and courier firms is likely to facilitate the import process and the collection of import VAT.
In addition to the I-OSS and the complementary special arrangement, simplified place-of-supply rules have been introduced for remote sale of goods imported from outside the EU into an EU Member State (the one that is not the EU Member State where the sale to the end customer is made).
Digital platforms and online marketplaces as facilitators of remote sales
Businesses operating electronic interfaces—such as marketplaces or platforms—will, in certain situations, be deemed for VAT purposes to be acquiring and onward supplying goods to customers in the EU themselves. Consequently, such facilitators will have an obligation to account for VAT on such distance sales notwithstanding the fact that they are mere facilitators. Such facilitators can also opt for the OSS or I-OSS.
Read an October 2020 report prepared by the KPMG member firm in Malta
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