The e-commerce VAT package taking effect soon
On 1 July 2021, the provisions of the amendment of the Slovak VAT Act concerning cross-border online trade will come into effect. These provisions are transposing the EU Directives which introduced so called „e-commerce VAT package“ that will soon become applicable all over the European Union.
The distant sale of goods and place of taxation
The Intra-EU distance sale of goods was defined, which will replace the current concept of distant sales, and a new definition of distance sale of goods imported from third countries was introduced.
New place-of supply rules were set out for the mentioned supplies of goods to customers (final consumers) with the aim of their taxation in the EU member state of consumption.
The threshold values of delivered goods set out by the individual EU member states, exceeding of which triggered, based on the “old” rules, VAT registration obligation in the EU member state of destination and obligation to account for VAT at appropriate rate in that EU member state, will no longer have to be observed. The place of supply of goods will in the relevant cases be in principle the place where the goods are located when the dispatch or transport of the goods to the customer ends.
To support micro-businesses, an exception will be allowed for suppliers established in one single EU member state, if the turnover threshold of EUR 10 000 for cross-border supplies of digital (“TBE”) services and intra-EU distance sales of goods is not exceeded. Based on defined conditions, these suppliers will be entitled to tax their supplies with the appropriate VAT rate applicable in the EU member state where they are established.
Supply of goods via electronic interfaces
A fiction of a supply was created for VAT purposes, where a taxable person operating electronic interfaces such as marketplaces or platforms will, in certain situations, be deemed for VAT purposes to be the supplier of goods. This implies that for VAT purposes, he will be considered to have purchased the goods from the underlying supplier and sold them onwards to the customer. Consequently, the electronic interface will have to apply the VAT applicable in the EU member state of consumption to the supply of goods and to remit this VAT to the tax administration in that EU member state.
This fiction will apply to distant sale of goods imported from third countries in consignments of an intrinsic value not exceeding EUR 150 or supplies of goods within the EU by a taxable person not established in the EU to a non-taxable person.
Special schemes for VAT – One Stop Shop and import One Stop Shop („OSS“ a „iOSS“)
The voluntary special schemes of “Mini One Stop Shop” (“MOSS”) have been used so far for telecommunications, broadcasting and electronically supplied (“TBE”) services supplied to consumers in the EU. As from 1 July 2021, their material and personal scope will be extended, which will result in their extension to a “One Stop Shop” (“OSS”):
- The scope of the special scheme for taxable persons not established in the EU supplying TBE services (i.e. “the non-Union scheme”) will be extended to all services supplied to non-taxable persons which take place in a EU member state (EU member state of consumption) in accordance with the place-of supply rules set out by Article 16 of the Slovak VAT Act.
- In the Union Scheme, suppliers established within the EU but not in the EU member state of consumption can also declare cross-border supplies of services to non-taxable persons taking place in the EU in line with Article 16 of the Slovak VAT Act. (Examples of services with the place of supply rules set out by Article 16 of the Slovak VAT Act are for example services connected to immovable property, hiring of means of transport, accommodation services, admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions, etc.).
- The Union Scheme will be extended to intra-Community distance sales of goods and to certain domestic supplies facilitated by electronic interfaces.
- A new scheme will be launched for distance sales of goods imported from third countries, so called Import One Stop Shop (“iOSS”). This scheme can be used by taxable persons for distance sales of goods imported from third countries when these goods are dispatched in a consignment of an intristic value not exceeding EUR 150. When the import scheme is used, these goods will then benefit from a VAT exemption upon importation.
The simplification resulting from using a voluntary special scheme lies in removing the supplier's obligation to register for VAT in each EU member state in which his supplies of goods or services take place. Instead, the VAT due on these supplies in the EU member state of consumption can be declared by the suppliers via a single VAT return filed via an electronic portal in a EU member state in which they become registered for using the special scheme (the so-called “EU member state of identification”). They will also pay the VAT liability in the EU member state of identification. The EU member state of identification forwards the respective amount of VAT to the EU member states of consumption.
Special arrangements for declaration and payment of import VAT
Where the import OSS is not used, special arrangements for declaration and payment of import VAT can be used for goods dispatched to customers in the EU in consignments of an intrinsic value not exceeding EUR 150 and which are not subject to excise duties. This simplification mechanism will enable customs declarants such as postal operators, courier firms, customs agents to collect VAT from customers and pay it to the customs authorities.
Abolition of exemption from import VAT for goods in small consignment of a value of up to EUR 22
As of 1 July 2021, import VAT exemption for goods in small consignments of a value of up to EUR 22 will be abolished. Thus, all commercial goods imported into the EU from a third country will be subject to VAT irrespective of their value, to create fair conditions for all market participants and to prevent distortion of competition when trading online.
The European Commission published Explanatory Notes for the VAT e-commerce rules which are available here: