EU: Review of deemed supply rules for online marketplaces, effective 1 July 2021
An online marketplace that “facilitates” certain sales will be subject to the deemed supply rules
Reforms to the VAT rules will affect sellers that sell via online marketplaces
The European Union (EU) introduced reforms to the value added tax (VAT) rules that will affect sellers that sell via online marketplaces beginning 1 July 2021.
As of 1 July 2021, an online marketplace (referred to as an “electronic interface” in the EU VAT law) that “facilitates” (as also defined by the EU VAT law) the following sales will be subject to the deemed supply rules:
- Sales of any value by a non-EU seller to a consumer within the EU (including domestic sales or intra-EU remote or distance sales)
- Distance sales of imported goods by both EU and non-EU sellers to consumers of consignments not exceeding €150
When the deemed supply rules apply, a sale between a seller and a customer is treated as two transactions for VAT purposes:
- The seller is deemed to have sold the goods to the marketplace—this is a business-to-business (B2B) supply, and no EU VAT is due on this transaction.
- The marketplace is deemed to have sold the goods to the consumer—this is a business-to-consumer (B2C) supply, and the marketplace is responsible for collecting the VAT due on the sale from the consumer.
The following examples are intended to help explain the rules.
A Swiss seller sells goods to a French customer (B2C) via a marketplace. Goods are shipped from a warehouse in Germany to the French customer.
- Currently: The seller must register for VAT purposes in Germany. Assuming the seller has exceeded the distance-sales threshold in France, the seller also must register for VAT in France. The sale is subject to VAT in France and must be reported in the seller’s French VAT return.
- As of 1 July 2021: The seller is deemed to have sold the goods to the marketplace. This is a 0% B2B sale in Germany, which the Swiss seller is to report in its German VAT return, although no VAT will be paid on this deemed supply. The marketplace is deemed to have sold the goods to the French customer. French VAT is due on this B2C transaction. The marketplace can either register in France or use the one-stop-shop (OSS) regime to account for and report the French VAT due.
A Swiss seller sells goods to an Italian customer (B2C) via a marketplace. Goods are shipped from a warehouse in Switzerland to the Italian customer. The value of the shipment does not exceed €150.
- Currently: The VAT treatment will depend on how the import is declared.
- If the customer is the importer of record, the customer will pay import VAT due (import VAT is exempt for shipments not exceeding €22) plus potentially an additional handling fee. The seller in this situation does not have any VAT compliance obligations in the EU.
- If the seller is the importer of record (sales under the Incoterms “delivered duty paid”), the seller will pay import VAT due. In addition, the seller is required to register for VAT in the country of importation
- As of 1 July 2021: The VAT treatment will depend on whether the marketplace uses the import one stop shop (IOSS) regime.
- If the marketplace uses the IOSS regime, the Swiss seller is deemed to have sold the goods to the marketplace outside the EU, and the Swiss seller has no VAT compliance obligations in the EU. The marketplace will account for VAT on the deemed supply to the Italian consumer using the IOSS regime. The Swiss seller needs to provide the marketplace’s IOSS number to the logistic provider to avoid VAT being charged upon importation.
- If the marketplace does not use the IOSS regime, VAT is due on import. The country of importation can determine who is the importer and thus is to pay the amount of import VAT due. Unless the country of importation determines that the Swiss seller is the importer, the Swiss seller would not have any VAT compliance obligations in the EU.
Accordingly, under the deemed supply rules, the EU VAT compliance burden for those selling via online marketplaces could be reduced.
Read an April 2021 report prepared by the KPMG member firm in Switzerland
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