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EU: Implementing new VAT collection rules for online sales

EU: Implementing VAT collection rules for online sales

The European Commission today issued a release concerning an agreement reached by EU Member States on detailed measures needed to simplify the value added tax (VAT) collection rules for sales of goods online. The new rules are intended to provide for a smooth introduction of the new VAT measures for e-commerce (as agreed to in December 2017) and to be effective in January 2021.

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As explained in an EC release, when non-EU companies—including those that use warehouses or fulfilment centres in the EU—sell goods to EU consumers through online marketplaces, it can be difficult for tax authorities to collect the VAT due on those goods.

  • Online marketplaces will be considered to act as the seller when they facilitate sales of goods having a value up to €150 to customers located in the EU by non-EU businesses using their platform.
  • The same rules will apply when non-EU businesses use online platforms to sell goods from fulfilment centres in the EU, regardless of value. This will allow tax authorities to collect the amount of VAT due on those sales.
  • Online platforms will be expected to keep records of sales of goods or services made by businesses using the platform.
  • The rules address when online marketplaces are considered to facilitate supplies (or not) based on whether or not they are setting the terms and conditions of the supply as well as their involvement in the payment or ordering and delivery of the goods.
  • The rules specify in detail what kind of records have to be kept by platforms facilitating supplies of goods or services to customers in the EU.

Final adoption of the new rules will be possible when the consultative opinion of the European Parliament becomes available. EU Member States can rely on the rules adopted today to start extending their IT systems.

The new VAT rules will apply from 1 January 2021 with EU Member States having until the end of 2020 to transpose the new rules of the VAT Directive into their national legislation. Businesses seeking to make use of the extended “VAT One Stop Shop” can start registering in EU Member States beginning 1 October 2020.

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