What are the new EU VAT rules and how do they impact e-commerce businesses?An overview of what online sellers need to know about the July 2021 EU VAT changes
Get up to speed on the 2021 EU VAT rules
The European Union’s new rules to streamline the value-added tax (VAT) reporting and processing for business-to-consumer (B2C) e-commerce sellers came into effect on 1 July 2021.
The latest regime includes the sale of goods to consumers within the 27 EU member states. It expands the EU’s 2015 VAT regulations, one of the first and most comprehensive at the time, which were limited to e-commerce businesses selling telecommunications, broadcasting, and electronic services.
The entire transaction supply chain — sellers, consumers, sales and payment platforms, postal and freight operators, couriers, customers, and tax authorities — is affected by the new EU VAT rules. VAT is applied to all goods and services, regardless of their commercial value. In addition, online sellers may now file a single EU VAT return through the One-Stop Shop (OSS) online portal.
Some highlights of the new July 2021 EU VAT rule changes:
- The new regulations remove the previous VAT exemption for goods valued up to €22, therefore VAT for goods ranging from €0 to €150 must now be paid in the EU member state the goods will be delivered.
- Customs duties are applied to all goods and services valued at €150 or more upon importation into the EU.
- EU-established suppliers of distance sales or B2C telecommunications, broadcasting, and entertainment services will be affected by the EU-wide threshold of €10.
- E-commerce businesses can work in one language through the tax administration of the member state they registered in or are most comfortable with.
- Depending on their business activities or supply chains, some online sellers will need to file more than one of the three types of VAT returns created as part of the new OSS scheme.
E-commerce goods and services affected by the OSS scheme:
- All B2C goods and services taking place within EU member states where the online seller is not established
- All distance sales of mail order, telesales, or online goods from suppliers in one EU country to customers in a different EU country who are not registered for VAT
- Certain domestic goods sold online under certain conditions
The three new types of OSS VAT returns:
- The Union One-Stop Shop is for EU-based sellers and all types of electronic B2C services, distance sales of goods within the EU, and certain domestic sales facilitated online (VAT returns and payments are submitted quarterly).
- The Non-Union One-Stop Shop is for non-EU based sellers to report their B2C sales of goods and services to customers in the EU (VAT returns and payments are submitted quarterly).
- The Import One-Stop Shop (IOSS) should be used for the distance sales of goods valued up to €150 that are imported from outside the EU to customers in the EU (VAT returns and payments are submitted monthly).
The key differences between the VAT returns pertain to the types of transactions and where the online sellers are established.
OSS VAT compliance challenges for online sellers:
- Although submitting one VAT return seems simple, the new 2021 EU VAT regulations are complex and create significant tax compliance challenges for e-commerce businesses since each of the 27 EU member states may have different VAT rates for the same goods or services based on where they will be consumed.
- Non-EU based online sellers may need to hire a fiscal representative, also known as an intermediary, in an EU member state to represent them.
- Digital filing formats, e-commerce rules, and processes vary among EU member states, and can change at any time.
The OSS joins HMRC’s Making Tax Digital and the forthcoming DAC6 EU Directive as the latest regulatory development to accelerate the move towards digital tax reporting, thus underscoring the need for corporate indirect tax teams to adopt a comprehensive tax technology solution.
Related insights to keep you informed
Discover our additional resources below to learn more about how ONESOURCE Indirect Compliance can help you simplify complex indirect tax compliance tasks and feel confident in your returns.
Simplify your EU VAT operations with software solutions for large e-commerce sellers
The new 2021 EU VAT regulations are complex and create significant tax compliance challenges for online sellers — especially if they don’t possess the right tools to manage, or ultimately simplify, their VAT obligations.
Although the new rules streamline VAT processes with the creation of a single OSS VAT return, online sellers need to understand that digital filing formats, e-commerce rates and rules, and processes vary among the 27 EU member states, and can change at any time.
If you’re a major online seller or a business facilitating sales to EU customers, is your indirect tax team fully prepared and equipped to comply with the various VAT rates and regulations for more than two dozen countries, as well as implement digital tax reporting? If not, it’s time to leverage tax technology to handle all aspects of your end-to-end VAT process.
Accurately calculate, report, and file VAT returns regardless of how often the tax rates or rules change in the 27 EU member states, or just about anywhere in the world you do business. Thomson Reuters ONESOURCE® Indirect Tax Compliance and ONESOURCE Determination cloud-based global tax software saves you time and helps you avoid costly mistakes.
How ONESOURCE manages your VAT process
Up-to-date tax rules and legislation are monitored and maintained by the Thomson Reuters in-house tax research team. ONESOURCE is cloud-based, so you’re always compliant with the latest VAT e-commerce regulations.
Easily upload and adjust source data, calculate your VAT return, and electronically submit to any EU member state or other countries, supported by a full audit trail and comprehensive reporting. Hosted in highly secure data centres, so you can have anytime access from anywhere.
Risk management controls across all functions enable an efficient review and sign off processes. Drill down from return box numbers to transactional level data and back.
ONESOURCE integrates data from multiple sources and organises it in a common, structured method with a consistent and repeatable process. Plus, working in the cloud-based platform optimises your team’s productivity and collaboration.
With VAT compliance and filing in over 50 countries, and the move towards digital tax reporting and real-time remittances, ONESOURCE supports your process transformation and company growth at a pace that suits your business. You’re already covered for the EU VAT OSS rules, MTD, VDEK, SAF-T and Spain’s SII.