EU finance ministers take another step towards new VAT rules on e-commerce

VAT collection on sales facilitated by online platforms

The VAT rules set out in Council Directive (EU) 2017/2455 provide that where a taxable person facilitates distance sales of goods imported from third countries to EU customers in consignments of value not exceeding EUR 150 through the use of an electronic interface (such as a marketplace, platform, portal or other similar means), that taxable person will be considered to act as the seller. This means that from the VAT point of view, the taxable person who facilitates the supply via online platform will be deemed to have received and supplied the goods himself.

The same rules will apply when non-EU businesses use online platforms to sell goods from “fulfilment centres” in the EU, irrespective of their value. Online platform providers will also be expected to keep records of sales of goods or services made by businesses using their platform.

The new implementing rules specify in more detail when online marketplaces are considered to facilitate such supplies or when they are not considered to do so. This should be 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 implementing rules also specify in detail what kind of records have to be kept by platforms facilitating supplies of goods or services to customers in the EU.

A new VAT system for e-commerce

The recently agreed Implementing rules should also ensure that a new VAT system is ready for businesses that sell goods online as of 2021. 

These measures comprise inter alia extension of the “One-Stop Shop”. Companies that sell goods online to their customers should gain a possibility to deal with their VAT obligations in the EU through one online portal in their own language. Without the portal, VAT registration would in general be required in each EU member state into which they want to sell.

Next steps

Adoption of the implementing rules will be possible only when the consultative opinion of the European Parliament becomes available. However, the European Commission indicated that the EU Member States can rely on the agreed rules to start extending their IT systems.

The new VAT rules for e-commerce will apply from 1 January 2021. The EU member states have to transpose the new rules of the VAT Directive into national legislation until the end of 2020. Businesses wishing to make use of the extended “One Stop Shop” should be enabled to start registering in EU member states as of 1 October 2020.