The EU VAT e-commerce package

20 September, 2021

‘Brexit’ has brought a number of changes and challenges for businesses trading in goods including longer delivery times, more administration and additional costs. These changes have ultimately impacted consumers as well.

On 1 January 2021, the UK introduced a set of new VAT rules for the imports of low value goods and as a result, UK and Manx Consumers will have seen changes impacting their online shopping, purchasing from overseas as well as sending packages abroad. This may have involved an unexpected VAT and duty bill to take delivery of a parcel as well as additional paperwork.

Similar changes have been introduced by the EU from 1 July 2021 as part of the EU VAT ‘e-commerce package’, which has been designed to facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses.

These new rules will have potential implications for Island based businesses providing services or selling goods to EU based customers. This could include registering for an extended EU based VAT accounting scheme.

The new rules aim to simplify the collection of VAT in the EU when consumers buy goods online, and introduce new obligations for marketplaces and platforms facilitating the online supply of goods imported from third countries in consignments of an intrinsic value not exceeding EUR 150, as well as domestic and intra-Community distance sale of goods.

These changes are complex and impact business carrying on B2C cross border e-commerce activities and will require detailed consideration to assess implementation requirements and impact on the consumer experience.

Key changes include:

the extension of the scope of the Mini One Stop Shop (‘MOSS’) to all types of services as well as to intra-community distance sales of goods - subject to a €10,000 threshold for supplies of goods and telecommunications, broadcasting and electronic services – turning the MOSS into a One Stop Shop (‘OSS’);
removal of the import VAT exemption for low value consignments, with VAT on distance sales of goods not exceeding €150 from outside the EU being accounted for via an Import One Stop Shop (‘IOSS’); and
the introduction of special provisions applicable to taxable persons who facilitate certain supplies made by other taxable persons through the use of an electronic interface such as a marketplace, platform, portal or similar means, with the effect that the electronic interface may be deemed to have received and supplied the goods itself.

In summary

The EU Commission has commented that the main benefits of the new rules include consumers having greater certainty about the VAT rate applied when buying goods online from outside or inside the EU and EU businesses being able to grow in a simplified, fairer environment and overcome the barriers to cross-border online sales.

In summary, this change marks another step as the UK/IoM and EU continue to extricate themselves from one another and create additional issues to Island based businesses to consider.

To discuss the challenges raised, please get in touch. For information about how we can help your business, please visit our Tax services page.