E-commerce legislation changes from 1 July 2021

Written by Nathalie Monahan, Indirect Tax Manager

Overview

Several significant amendments to the way VAT operates for cross border business to consumer (B2C) e-commerce activities will come into force from 1 July 2021. These amendments have been outlined below:

• Extension of the VAT Mini One Stop Shop (MOSS) to a One Stop Shop (OSS).

• The treatment of Online Marketplaces and Platforms as deemed suppliers for certain transactions.

• Introduction of a new Import One Stop Shop (IOSS).

• Introduction of Special Arrangements for certain imports of goods.

Extension of the VAT MOSS to an OSS

The MOSS currently only applies to B2C supplies of Telecommunications, Broadcasting and Electronic (TBE) services. There are currently two schemes covered by MOSS i.e., the Union Scheme and the Non-Union Scheme. However, from 1 July 2021 MOSS is being extended to an OSS.

Union Scheme

The Union scheme will be extended and will apply to EU and non-EU established suppliers for different types of supplies.

Distance Sales

The current EU distance sales thresholds remain in place until 30 June 2021. From 1 July 2021 these thresholds will be withdrawn and all suppliers of distance sales i.e., supplies of goods located in one Member State sold and delivered by the supplier to a non-taxable person in another Member State, will have to charge local VAT in the Member State to which the goods are delivered (subject to the €10,000 EU wide threshold).

However, from 1 July 2021 suppliers of distance sales will no longer be obliged to register for VAT in each Member State where the goods are delivered to. Instead they may opt to register and file an OSS return in the supplier’s country of establishment for EU suppliers, or a nominated country for non-EU established suppliers to declare and pay the VAT due in each Member State.

As such, both EU and non-EU established suppliers of distance sales can avail of the Union Scheme to declare VAT due on distance sales of goods.

B2C Services

From 1 July 2021, the scope of the Union Scheme will also be extended to enable EU established suppliers report all B2C services supplied in the EU where the place of supply of the service is the Member State where the consumer is located.

Non-Union Scheme

From 1 July 2021, the scope of the Non-Union Scheme will be extended to enable non-EU established suppliers report all B2C services supplied in the EU, where the place of supply of the service is the Member State where the consumer is located.

The treatment of Online Marketplaces and Platforms as deemed suppliers for certain transactions

 Certain supplies of goods from an underlying supplier to an end customer, through an online marketplace or platform, will be artificially split into two supplies:

• a supply from the underlying supplier to the online marketplace or platform; and

• a supply from that online marketplace or platform to the customer.

An online marketplace or platform will be deemed to be making such supplies when they facilitate the following transactions:

• the importation of goods from outside the EU in consignments of an intrinsic value not exceeding €150 regardless of where the underlying supplier is established; and/or

• intra-EU distance sales of goods and domestic supplies of goods, regardless of the value of the goods, but where the underlying supplier is established outside of the EU.

Where an online marketplace or platform is deemed to be making supplies of goods, they will be treated like any other supplier of goods and can therefore avail of the Union scheme or the IOSS or both, depending on the supplies they are making.

Introduction of a new Import One Stop Shop (IOSS)

From 1 July 2021, the current exemption for low value imports (€22) will be abolished and all goods imported into the EU will be subject to VAT.

The IOSS is an optional scheme which was created to facilitate the declaration & payment of VAT on distance sales of low value goods which are imported from third countries. This can be used for goods imported with an intrinsic value of ≤€150.

The scheme can be used by EU/Non-EU suppliers and electronic interfaces selling goods to private individuals in EU Member States. 

The tax authorities in the Member State of identification will issue a 12 digit IOSS VAT identification number and all EU imports with a value ≤€150 will be reported on a single monthly return in the MS of identification on the last day of the month following the period.

The IOSS can be used from 1 July 2021 and registration for the scheme is available now in all EU Member States.

Introduction of Special Arrangements for certain imports of goods

In circumstances where the seller does not elect to use the IOSS system, there are special arrangements available for goods imported that do not exceed €150 in value.

The special arrangements allow postal operators, express carriers or customs agents to collect the VAT due on import from the importer of the goods (i.e. the customer).  In these circumstances VAT will be applied at the standard rate of VAT (currently 23%) to all consignments irrespective of the category of goods being imported.  This provision implies that goods that are usually liable to VAT at 0%, such as children’s clothes and footwear, would be subject to VAT at 23%.

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