Even if you are using a third-party fulfillment service, like Amazon FBA, you must register for VAT in the EU.
Furthermore, the current de minimis threshold of €22 will fall away, and every EU e-commerce transaction will be subject to EU VAT and a Customs Declaration.
Why is the EU making VAT Changes?
Cross-border eCommerce was not a consideration when the European Commission created its VAT policies. As a result, the current policies favour non-EU merchants not subject to VAT. At the same time, the EU loses out on billions of Euros in lost VAT revenue annually.
European merchants are subject to pay VAT for all transactions, while merchants outside of the EU member states are not. This VAT requirement for EU merchants creates an unequal playing field where “outsiders” can compete without charging customers 15% VAT.
The European Commission estimates that the new requirement will not only assist EU merchants but also bring an additional €7 billion in VAT revenue.
Who will have to register for EU VAT?
If you are trading or moving goods in, around, or out of Europe, there is a high likelihood you will be liable to pay VAT.
In the current system, each country determines its own domestic and distance selling thresholds. In 2019, the EU set a global threshold of €10,000 for telecommunications, broadcasting, and electronic (TBE) services. This same €10,000 threshold will extend to all businesses in July 2021. Even with the thresholds, VAT for the customer is unavoidable. Transactions with merchants who fall below the selling thresholds will require the buyer to pay VAT to customs upon goods entering the EU.
Changes to Customs Procedures 2021
To collect VAT efficiently and effectively, the EU has had to make significant changes to its customs procedures.
Greater Waybill Transparency
Starting 1 July 2021, EU Customs will prescreen ALL shipments at the country of departure before the freight company can load the goods. For this reason, a detailed waybill with a description of goods must accompany the shipment.
Details must include:
- Shipper, Exporter, Receiver, and Importer of Record address & contact
- Value of the goods, freight, and insurance costs (depending on the Incoterm)
- Line item, detailed Goods Description, HS codes, and Country of Origin
- Incoterms, Weight & Quantity
- Type of Transaction & Reason for Export
Here are some examples of waybill descriptions the EU will no longer accept:
No longer accepted:
– Samples
New Mandatory Description:
Samples of curtains (including drapes) and interior blinds; curtain or bed valances of cotton HS Code: 6303.91.XXXX (last digits are country-specific)
No longer accepted:
- Parts
New Mandatory Description:
Parts of pumps for liquids, whether or not fitted with a measuring device; liquid elevators HS Code: 8413.91.XXXX
Mini One Stop Shop (MOSS) EU VAT Portal
The Mini One Stop Shop (MOSS) will coincide with the new VAT and Customs regulations.
2015, the EU established the MOSS portal to make it easy for merchants to register and pay EU VAT. The system is currently used by telecommunications, broadcasting, or electronically supplied services to pay VAT.
Starting in July 2021, all businesses will use the MOSS portal to submit returns and pay VAT.
Import Control System 2 (ICS2)
In 2021 the EU will also implement Import Control System 2 (ICS2). ICS2 is an advanced cargo information and risk analysis system designed to alert customs officials to possible security threats.
As with the new VAT procedures, ICS2 is an advanced system whereby shipments are screened and approved before loading at the country of departure.
The EU promises ICS2 is more effective and efficient at screening for threats while keeping shipments moving without unnecessary delays.
“It will collect data about all goods entering the EU prior to their arrival. Economic Operators (EOs) will have to declare safety and security data to ICS2, through the Entry Summary Declaration (ENS)”.
Excerpt from EU Import Control System 2 (ICS2)
According to the EU’s official documentation, ICS2 will:
- Increase the protection of EU citizens and the internal market against security and safety threats;
- Allow EU Customs authorities to identify high-risk consignments better and intervene at the most appropriate point in the supply chain;
- Support proportionate targeted customs measures at the external borders in crisis response scenarios;
- Facilitate cross-border clearance for the legitimate trade;
- Simplify the exchange of information between Economic Operators (EOs) and EU Customs Authorities.
ICS2 Three-Stage Release
The EU has outlined a three-stage implementation for ICS2 with Release 1 taking effect March 1, 2021.
ICS2 Release 1
- Who? – Express carriers and European based postal operators and Third-country postal operators shipping to Europe.
- When? – The first release becomes effective on 15 March 2021.
- How? – Pre-Loading Advance Cargo Information (PLACI) using the minimum ENS dataset.
ICS2 Release 2
- Who? – Postal operators, express and air carriers, and freight forwarders.
- When? – The second release becomes effective on 1 March 2023.
- How? – Operators have to complete the ENS dataset for all goods in air transport.
ICS2 Release 3
- Who? – Operators carrying goods on maritime and inland waterways and roads and railways.
- When? – The final release becomes effective on 1 March 2024.
- How? – Operators have to complete the ENS dataset for all goods in these sectors, including postal and express consignments.
eLogistics – Logistics for eCommerce
Navigating the world of logistics in the world of eCommerce can be daunting. In 2019 I released eLogisitics – Logistics for eCommerce. In it, I simplify terminology, international regulations, and the many fascitis of cross-border eCommerce.
I also speak about technologies like blockchain and the future of eLogistics as we move more towards fully digital systems for trade.
The EU’s new Customs regulations take a positive step towards digitizing cross-border systems, and we are likely to see many countries implementing similar procedures.
Currently EU and non-EU sellers selling goods online to EU consumers can import the goods into the EU, directly to the consumer, import VAT-free if the consignment of good(s) is valued at €22 or below. This ends 1 July 2021 and all imports will be subject to EU VAT. Sellers and facilitating marketplaces can collect import VAT on import consignments valued up to €150. Or they may use the new Special Arrangements and have postal operators collect the import VAT. The 2021 EU VAT e-commerce package is delayed, until 1 July 2021.
This is one of three reforms as part of the July 2021 EU e-commerce VAT package. The other two reforms are:
- Launching the One-Stop-Shop EU VAT Return; and
- Making marketplaces deemed supplier VAT.
The low-value consignment VAT exemption, termed the ‘low value consignment stock relief’, was intended to relieve customs from the burden of checking large volumes of packages for small amounts of potential tax revenues. However, it is leaving EU-based sellers at a major price disadvantage since they must charge VAT when the goods were dispatched from within the EU. The exemption has also encouraged large-scale fraud by sellers deliberately under declaring the values of goods to escape the import VAT bill.
Switching import VAT to point-of-sale – Green Channel clearance
The EU has therefore agreed to scrap the import VAT exempt threshold. Instead, it will require EU and non-EU sellers to charge VAT at the point of sale for consignments of €150 or below. This will create a more efficient ‘Green Channel’, with quick and easy customs clearance. Note – the delivery agent may still act as the import VAT collector (see below).
Sellers will charge VAT at the rate of their customer’s EU country of residence at the point-of-sale on the website. Sellers can use the delivery address of the customer to determine the country VAT rate. No VAT is due at the point of import in this case.
IOSS import VAT simplified reporting
To report the VAT charged at the point of sale, a new declaration, ‘Import One-Stop-Shop’ (IOSS), is being introduced. This will report distance selling across EU borders of imported consignments not exceeding €150. Sellers, or deemed supplier marketplaces, will have to register for IOSS in just one EU state. They will be issued a unique IOSS identification number which should be listed on all packages sent to the EU. This will indicate to Customs that VAT is being properly declared and help ensure speedy customs clearance.
Like the OSS, IOSS will be a quarterly filing submitted to a tax authority in one nominated EU member state. It will declare import VAT due in all EU countries. The format and due dates will be the same as the VAT OSS. Sellers will have to make a single cash payment of the VAT due to the country where they are IOSS registered.
Ending the distance selling threshold rules
The current EU VAT regime ‘place of supply’ rules require sellers to charge the VAT rate of their customer’s country of residence – known as the destination principle. For EU cross-border sales this means sellers have to VAT register in each country where they are selling goods.
Currently, to reduce the burden on small sellers, the EU operates a special VAT registration simplification for e-commerce, known as distance selling thresholds. This is generally only available for sales from a sellers’ domestic stocks.
EU distance selling thresholds until June 2021:
- €100,000 per annum: Germany; the Netherlands; Luxembourg; UK which is still in the EU VAT regime (£70,000).
- For all other members of the EU it is €35,000 per annum or local currency equivalent.
More information on these distance selling thresholds can be found at www.avalara.com.
From 1 July 2021, this registration threshold simplification will be withdrawn. Cross-border sellers will have to charge the VAT rate of the customer’s country of residence from their first sale and remit it to the foreign tax authorities.
Launching the single OOS EU VAT return
At the same time as withdrawing the distance selling thresholds, the EU is extending the single VAT return, OSS, to e-commerce cross-border distance selling of goods. This will replace the obligation to VAT register in every country where sellers are making sales to EU consumers from stocks in a single EU location – typically their home state. The existing obligation to register in all countries is often called out as the principal barrier to cross-border trade in the EU. A single VAT return, listing all pan-EU sales, has already been in place (known as the Mini One-Stop-Shop, MOSS) since 2015 for B2C cross-border sales of digital, telecoms and broadcast services.
NOTE: Sellers holding stock in other EU countries will not benefit from the OSS single return simplification. They must remain VAT registered in each country where they are holding stock. This includes selling using the Amazon FBA program.
Sellers with existing foreign VAT registrations, and selling from stock in their country of residence, may opt to close these non-resident registrations from 1 July 2021 and use the OSS report instead.
Sellers will continue to declare any sales to customers in their own country of residence through their existing domestic VAT return. OSS may also be used to report: cross-border B2C traditional services; and certain domestic sale facilitated by marketplaces (see next section).
The OSS filing is in addition to the regular domestic VAT return. Firstly, sellers will charge VAT at the rate of their customer’s country of residence. They can use the delivery address of their customer to identify the country of residence. Then determine the correct VAT rate, as well as applying reduced or nil VAT rates, according to the varying rates and goods classifications of each member state of their customers.
The OSS filing will be a quarterly return. It is intended as a simple listing to declare VAT due by the seller to each EU country apart from the domestic state. The OSS return will be standardised across all the EU member states, and will be structured as follows:
Example OSS return from July 2021
| Member state | VAT rate type | VAT rate in member state | Total value of supplies exc VAT | VAT due |
| France | Standard | 20% | €238,000 | €47,600 |
| Reduced | 5% | €15,000 | €750 | |
| Germany | Standard | 19% | €340,000 | €64,600 |
| Reduced | 7% | €0 | €0 | |
| Spain | Standard | 21% | €123,000 | €25,830 |
| Reduced | 10% | €4,500 | €450 | |
| Poland | Standard | 23% | €8,000 | €1,840 |
| Reduced | 8% | €0 | €0 | |
| Other states… | ||||
| Total VAT due | €141,070 |
The amounts should be shown in the seller’s domestic country’s currency. In the case of a foreign currency translation, sellers should be following their domestic country’s guidance on rates to use at the date of the transaction.
Non-EU sellers
Sellers who are non-resident in the EU may also use the OSS simplified filing. They must first register as a ‘non-Union’ taxpayer with the tax authority of any EU member state. They can then file quarterly OSS filings like any EU e-commerce seller. There is a requirement to file a regular domestic VAT return in at least one EU member state. VAT incurred on imports may be declared in the OSS, too.
Filing OSS
The OSS filing should be submitted on the same date as the regular quarterly VAT return. This is usually done though the tax authority’s online portal. Taxpayers on monthly VAT returns should consult their local tax authority’s website to check the due date. The VAT due should be remitted by the same deadline.
The domestic tax authorities will then be responsible for dividing-up and paying the VAT received from the seller to each country as appropriate.
What will this mean for a typical seller?
To show how this will affect a typical EU seller, let us look at the VAT filing obligations for an example seller today, and after the July 2021 reforms.
Eurotrade GmbH, established in Germany, sells online to consumers across the EU. It holds most of its stock in Germany, from where it ships. However, it holds some stock in France for speedy delivery to its French consumers.
Eurotrade GmbH annual sales, and VAT obligations are as follows:
| Country | Annual sales | Today | July 2021 | ||||
| VAT return | VAT % | VAT return | VAT % | ||||
| Germany | €780,000 | German domestic VAT return | German 19% | German domestic VAT return | German 19% | ||
| Spain | €54,000 | 1 | Spanish VAT return | Spanish 21% | OSS | Spanish 21% | |
| Italy | €42,000 | 1 | Italy VAT return | Italian 22% | OSS | Italian 22% | |
| Hungary | €23,000 | 2 | German domestic VAT return | German 19% | OSS | Hungarian 27% | |
| Luxembourg | €75,000 | 2 | German domestic VAT return | German 19% | OSS | Luxembourg 17% | |
| France | €75,000 | 3 | French VAT return | French 20% | French VAT return | French 20% |
1 – Today, above the Distance Selling Threshold so must foreign VAT register; post-July 2021 may close this registration
2 – Today, below the Distance Selling Threshold so report sales under German rules; post July 2021 switches to foreign VAT, reported via OSS
3 – Today, holding stock in foreign country so must VAT register there; post July 2021 must remain foreign VAT registered in France
€10,000 exemption for EU micro-businesses
The EU will grant EU-resident micro-businesses an exemption from the OSS rules. This reflects the experience of the roll-out of the 2015 MOSS return which imposed overly complex customer tracking and VAT calculations on the smallest of sellers.
Any businesses selling less than €10,000 per annum cross-border on B2C goods and services will be exempt from the obligation to complete an OSS return. Instead, they will be able to charge their domestic VAT rate and report the sales below this threshold in their regular domestic VAT return.
This relief is not available to non-EU businesses. The must register immediately.
Brexit – the effect for UK and EU sellers
The UK left the EU VAT regime on 31 December 2020. This means UK sellers are now non-EU sellers at the same time as the introduction of the July 2021 e-commerce reforms. UK resident sellers will have to register in one of the EU states to file a ‘non-Union’ OSS return. UK sellers will still be able to close any EU VAT registrations if they are not holding stock in those states.
UK sellers selling to EU customers now have to consider appointing a VAT Fiscal Representative in most of the EU countries where they are registered. Once the reforms pass into effect in July 2021, they may then register for the non-union OSS return.
EU sellers and the IOSS
EU sellers selling goods located outside of the EU to EU customers may also use the IOSS. It will be particularly useful where the seller’s customers are located in other EU states and the seller wants to take care of the import VAT on behalf of their consumer. It also relieves the seller of having to undertake a full VAT registration in each country it is importing into.
What will this mean for a typical non-EU seller?
Non-EU sellers, including from the UK, will have to appoint a VAT Intermediary to act as their agent in a similar way as to a Fiscal Representative. To understand the effects on a typical non-EU seller, let us consider the VAT obligations today and post-2021 reforms for an example non-EU seller, ShanghaiTrade LLC from China.
| Today | ShanghaiTrade LLC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or ShanghaiTrade LLC has to pay import VAT at the rate of the country of import. To provide a good seller experience, ShanghaiTrade LLC pays the import VAT on behalf of its customers. |
| July 2021 | ShanghaiTrade LLC will charge VAT at the point-of-sale and declare it in an IOSS return if not exceeding €150. They are then exempted from paying import VAT at Customs. ShanghaiTrade LLC may also declare sales to customers around the EU via its OSS return, as discussed in the above section. For consignments exceeding the €150 IOSS threshold, the import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for ShanghaiTrade LLC if they wish to sell the goods locally or to consumers in the rest of the EU. |
IOSS is optional – Special Arrangements – Postal service or marketplaces may declare the VAT instead
The import OSS is not compulsory for consignments not exceeding €150. Alternatively, the seller or deemed supplier marketplace may elect to have the import VAT collected from the final customer by the Customs declarant. This is known as the Special Arrangements. This is generally the postal operator, courier firm or Customs agent. They can settle the VAT collected with the tax authorities via a monthly payment.
In certain circumstances, marketplaces facilitating the sale will be responsible for the VAT being charged at the point-of-sale for the EU or non-EU. This is detailed in the next section.
Brexit – the effect on IOSS
The UK left the EU VAT regime on 31 December 2020. At the same time, the UK withdrew its EU £15 low-value consignment stock relief threshold on this date – from 1 January 2021. It introduced a new £135 VAT-at-point-of sale regime, similar to the EU’s €150 scheme. Non-EU sellers must charge UK customers 20% VAT, UK VAT register and the declare and pays the VAT charged to their UK customers. There is no Special Arrangements opt out as above.
For sales to EU consumers, British resident sellers are now considered as non-EU residents. From July 2021, they will be able to use the EU IOSS as non-Union sellers. This will require them to register in any one EU state for the quarterly filing and VAT payments.
Non-UK sellers would also be able declare imports into the UK via its new parcel regime.
Simplified Customs declaration
To help importers and Customs authorities cope with the ballooning volume of low-value consignments, the standard customs declaration for goods not exceeding €150 is to be condensed. From July 2021, sellers will be able to provide a simplified declaration at the point of import into the EU. This is a ‘super-reduced dataset’ for the party declaring the import.
The existing duties exemption for most goods not exceeding €150 will remain in place.
The e-Commerce VAT Package
On 1 July 2021, the 27 member states of the European Union (EU) will introduce sweeping reforms to the VAT obligations for B2C e-commerce sellers and marketplaces. This includes major changes:
- Launching the One-Stop-Shop EU VAT return;
- Ending low-value import VAT exemption and new IOSS return; and
- Making marketplaces deemed supplier VAT.
The flagship reform will mean some sellers will be able to report all their pan-EU sales on a single VAT return in their home country instead of having multiple VAT registrations across the EU. The aim is to boost cross-border online trade and promote trade across the EU’s digital single market by reducing compliance obligations. UK has implemented VAT marketplace liabilities reforms from 1 January 2021. The 2021 EU VAT e-commerce package was delayed, including this reform to 1 July 2021 – original date 1 January 2021.
The changes also seek to tackle the stubborn €5 billion e-commerce VAT fraud gap, with member states looking to close import loopholes and co-opt online marketplaces into collecting VAT in place of sellers.
This guide provides an overview of the major reforms, and how it will affect sellers and marketplaces’ obligations. This is based on three major reforms planned for July 2021.
1. A single EU VAT return for ecommerce distance selling
When the reforms come into effect, the existing ‘Distance Selling Thresholds’ simplifications will be withdrawn. This will be accompanied by the roll out of a single EU VAT return, One Stop Shop (‘OSS’). Sellers shipping goods from their home country to customers across the EU may opt to use OSS to report all their pan-EU sales. This is instead of the current requirement of being VAT registered in each country once the seller has passed the relevant country distance selling threshold. This is an extension of the 2015 Mini One-Stop-Shop (‘MOSS’), which successfully trialled a single EU return for B2C sales of digital, telecoms and broadcast services (streaming media, e-books, apps etc.).
Implications: It is important to note that no action is required until 2021. After July 2021, some e-commerce sellers will be able to close their foreign VAT registrations. They can instead complete a quarterly OSS return for their home country’s tax authority. Non-EU sellers may use OSS, too. OSS will list: sales by EU country, VAT % used, and VAT due. This VAT must be paid to the home country’s tax office.
Note: Sellers holding stocks in warehouses in other EU states will still have to remain foreign VAT registered following the July 2021 reforms. This includes sellers using the Fulfilment by Amazon (FBA) program. There will be exceptions for sellers using marketplace facilitators (see Section 3).
In addition to distance selling, the B2C service and event organisers may use OSS.
2. Closing the import VAT exemption loophole – import ‘Green Channel’
From July 2021, the €22 VAT exemption on small parcels being imported into the EU for delivery to consumers will be withdrawn. This exemption has been heavily abused by many sellers mistakenly or deliberately under-declaring the import values of goods to avoid VAT. Instead, VAT must be charged at the point-of-sale for consignments not exceedng €150. This VAT is may be declared and paid via a new submission, the ‘Import One Stop Shop’ (IOSS). This will create a more efficient fast-track, or ‘Green Channel’, quick and easy customs clearance.
Implications: From July 2021, EU sellers will no longer be disadvantaged on price, as non-EU sellers will have to charge VAT on all imported goods. Non-EU sellers will have to register for IOSS in just one EU state to declare the VAT on any affected imports on shipments below €150. This is known as the ‘non-Union scheme’. However, non-EU sellers will require at least one regular VAT registration in one Union member state. There are instances where a facilitating marketplace (see marketplace deemed supplier rules), or delivery service may step in to report and pay the VAT. If any seller chooses not to use the IOSS, the customer will have to pay the delivery or customs agent to access their goods.
However, sellers and marketplaces may opt instead to use the Special Arrangements and have postal agents and customs agents instead collect the import VAT on consignments not exceeding €150.
3. Marketplaces become the deemed supplier and VAT collector
The July 2021 reforms will oblige marketplaces which facilitate cross-border sales to consumers via third parties to become the ‘deemed supplier’ in certain cases. This is also termed the full liability regime. This marketplace VAT liability does extend to product liability.
The EU has defined ‘facilitating’ as “electronic platforms assisting sellers and consumers to come together and strike a contract for the supply of goods on a cross-border basis”. The new deemed supplier regime will apply in two use cases when the marketplace is facilitating a B2C sale: imports not exceeding €150; and distance selling cross-border or domestic transactions of any value for non-EU sellers. There is scope for the marketplace to opt-out of this scheme, and the VAT obligations to be transferred to the delivery company of the seller.
Implications: After July 2021, marketplaces will become responsible for charging and collecting VAT on deemed supplier transactions. However, the marketplace does not take on product liability or regulatory obligations. For imports not exceeding €150, instead of import VAT, the marketplace will charge the customer VAT at the point-of-sale and declare it instead of the seller. Both EU and non-EU sellers will benefit from reduced VAT obligations, and may be able to deregister in some EU states.
EU July 2021 marketplaces VAT deemed supplier rules
From July 2021, marketplaces may become the deemed supplier when they facilitate certain cross-border B2C transactions of their third-party sellers. They will therefore be liable to collect, report and remit the VAT due from the consumer. Whilst the marketplace takes on the VAT rights and obligations of the sale, they do not take on other obligations, such as product liabilities. This new rule comes into force as part of the e-commerce package of reforms to help simplify VAT compliance and tackle online VAT fraud. Note: there is an opt out for this obligations under the Special Arrangements, moving the VAT collections role to postal services and customs agents instead.
This is one of three reforms as part of the July 2021 EU e-commerce VAT package. The other two reforms are:
- Launching the One-Stop-Shop EU VAT Return; and
- Ending low-value Import VAT exemption and new IOSS Return.
The 2021 EU VAT e-commerce package was delayed, including this reform, until 1 July 2021. In addition, the UK marketplace VAT liabilities has already implemented marketplace obligations from 1 January 2021 – the end of the UK’s Brexit transition period.
To understand where the new rules will apply, the following facts should be examined: defining a marketplace; is there facilitation; and which transactions are in scope. Once a deemed supply has been identified, a new two-stage VAT transaction process must be applied.
I. Defining a marketplace
The EU Council implementing regulation for the July 2021 e-commerce package refers to ‘electronic interfaces’ (‘EI’), which includes online marketplaces, platform, portal or similar means. The role of the marketplace is to introduce customers and sellers offering goods for sale, and who then enter into a contract which results in a taxable supply.
II. Is the marketplace facilitating the sale?
A marketplace is considered to facilitate a sale when it participates in any of the following:
- Controls the terms and conditions of the sale;
- Authorises the charge to the customer in respect of the payment for the supply; and/or
- Orders or delivers the goods.
However, the marketplace is not considered to facilitate the sale if it only provides one of the following services in relation to the sale:
- Payment processing;
- Listing or advertising the goods;
- Redirecting customers to other marketplaces where the goods are offered without any further involvement in the sale.
III. Which transactions are in scope?
Two types of cross-border transactions are in scope for the July 2021 deemed supplier rule changes when facilitated by a marketplace:
- Import sales by EU or non-EU sellers to consumers of consignments not exceeding €150; and
- Consignments sold by a non-EU seller to an EU consumer of any value. This may be on a distance sale (cross-border) or domestic sale basis.
Two-stage VAT transaction for deemed supplier marketplace sales
To effect the new rules, once a seller and customer have agreed a sale, the existing single transaction procedure between the seller and customer will be split into two:
1. The seller will sell the goods to the marketplace on a B2B VAT exempt with credit basis. This means the seller remains free to deduct any input VAT suffered on the purchase of the goods. The transport of the goods will be attached to this transaction, so entitling it to zero-rating.
2. The marketplace will sell the goods to the consumer, charging the VAT rate of the consumer’s country of residence. The VAT is due at the earliest of the marketplace receiving the order, commitment or order to pay from the consumer.
To understand the marketplace facilitation use cases, let us take two examples.
Example 1: Import followed by distance selling below €150
DeutschShopper GmbH is a German-resident seller. It makes sales to French and Italian consumers via a facilitating marketplace. The goods are valued below €150, and are sourced from China and then imported into France initially.
Today: DeutschShopper is VAT registered in France to recover the French import VAT and charge 20% French VAT to the consumer. It must also be VAT registered in Italy (assume it is over the distance selling threshold of €35,000) to report the distance sales from France to Italian consumers, and charge 22% Italian VAT.
From July 2021: The facilitating marketplace will become the deemed supplier, and will take responsibility for the import into France in its EU One Stop Shop (OSS) or IOSS declaration ( See the new 2021 OSS single EU VAT return). It will charge the French and Italian consumers 20% and 22%, respectively, at the point-of-sale. This effectively replaces the import VAT. It follows the new rules under the withdrawal of the low-value consignment stock relief, also to be introduced in 2021. DeutschShopper can close its French and Italian VAT registrations if not using it for other purposes. For example, holding local stocks in Italy, selling via its own website or selling goods over €150.
Example 2: Non-EU selling goods across EU borders for any value
USSeller, Inc, is a US-resident seller. It buys goods in France for resale to French and German consumers via a facilitating marketplace.
Today: USSeller is French VAT registered in order to charge 20% French VAT on domestic sales, and to recover the French input VAT it is charged when it buys stocks. It is also German VAT registered (assume it is over the German distance selling threshold of €100,000) to charge 19% German VAT to consumers.
From July 2021: The facilitating marketplace will become the deemed supplier for the French and German sales to local consumers. The marketplace will report the sales through either its own local VAT registration in France or Germany. Or, if the marketplace does not have a local registration, it can instead use its single EU IOSS for sales in France and Germany. USSeller may de-register from France and Germany – unless it is selling off the marketplace or holding stock locally. Lastly, it can recover the French VAT it paid when initially buying its stock via a 13th Directive VAT recovery claim.
Marketplace record keeping obligations
In addition to taking on potential deemed supplier VAT responsibilities, marketplaces will also have new record keeping responsibilities. They will be required to keep sellers’ transactions in sufficient detail to enable tax authorities in the country of the customer to check that VAT has been correctly accounted for. The must be held electronically for at least 10 years after the year of the transaction.
Marketplace liable for mis-declared VAT?
A marketplace will not be held liable for underpaid VAT on deemed supplier transactions where the seller provided it with erroneous information that was required for the VAT calculation. But the marketplace will have to demonstrate that it did not and could no reasonably have known that the information was incorrect.
Brexit implications?
The UK left the EU VAT regime on 31 December 2020. The July 2021 EU deemed supplier marketplace reforms will therefore not apply to transactions in the UK.
UK e-commerce marketplace deemed supplier rules were introduced on 1 January 2021. They are similar to the above EU rules. The major difference is that instead of the IOSS import return, marketplaces will use a regular UK VAT return. And there is no Special Arrangements opt out in the UK.
