European Union Rolls Out New Rules to Simplify VAT Collection for Cross-Border Online Sellers
Effective July 1, 2021 the European Union has updated its value added tax collection requirements for e-commerce sellers. These rule updates concern all sellers making remote business to customer sales in the EU, whether from an EU member state or from another country:
- The sales threshold of EUR 100,000 or EUR 35,000, depending on the member country, has been abolished. In its place, there is now an EU-wide threshold of EUR 10,000, after which businesses are required to collect and remit VAT to all countries where their customers are located.
- The VAT exemption for low-cost goods valued under EU 22 has been abolished.
- New rules have been put into place for “Deemed Suppliers.” Deemed suppliers are Online Electronic Interfaces, including websites, portals, marketplaces, and platforms, that facilitate sales with a value of less than EUR 150 from sellers who are not based within the EU. Deemed Suppliers are now required to collect and remit tax on sales to EU customers if the seller is not registered.
- Online Electronic Interfaces are also required to maintain sales records of all transactions they facilitate in the EU, whether or not they are Deemed Suppliers. Records must be kept for a minimum of ten years and must be able to be made available electronically upon request to any member state.
To simplify and standardize compliance with these new rules, the European Union has created two new electronic portals for businesses and deemed suppliers: the One-Stop Shop (OSS), for businesses established in the EU, and the Import One-Stop Shop (IOSS) for businesses making sales from outside the EU:
- One Stop Shop: EU based businesses can now sign up through the OSS portal on their own country’s website and collect and remit VAT for customers located in other EU states directly through the portal.
- Import One Stop Shop: Non-EU businesses can file and pay monthly returns on all sales to EU based customers through a single portal. Companies that are not already collecting VAT in an EU country will need to appoint an EU established intermediary to begin collecting and remitting VAT through the IOSS.
All businesses making sales to customers in the European Union are potentially affected by these new rules and should investigate carefully if they have new obligations within the EU and how they can best use the new resources that have been made available to simplify their compliance in countries where they may already be registered. (European Commission, Taxation and Customs Union)