Purpose of note on EU VAT changes
The purpose of this note is to provide a reminder to our clients of some of the EU VAT rules that come into place from 1st July 21. We have not explained all the rules, just those that we think are most relevant to our clients. You can read a summary of the rules here.
Abolition of EU VAT distance selling thresholds
There are different national VAT registration thresholds (called Distance Selling Thresholds) set by each country to make life easier for businesses and to encourage cross border trade. If a company exceeds a threshold it needs to register for VAT in the relevant destination country. EU business often need to register for VAT in different countries. Because different countries have different thresholds and rules It can be quite complicated to keep track of this.
From 1 July the individual country Distance Selling Thresholds will be withdrawn and replaced with a single intra-community sales threshold of €10k. If sales exceed this the business needs to pay VAT in all of the destination countries.
However, now rather than register for VAT in each country, EU businesses have the option of registering for VAT in just one EU country and filing a single pan European VAT return. This is called the One Stop Shop (see below).
Note that the distance selling rules and the One Stop Shop don’t apply to sales from the UK to EU consumers. The rules only apply to businesses that hold stock in the EU and sell stock to consumers (not businesses) in other EU countries.
One Stop Shop (OSS)
The One Stop Shop (OSS) is an optional scheme that allows EU businesses to submit a pan EU VAT return for their B2C intra community sales. This is a great scheme as it will allow some EU based sellers to close many of their overseas VAT registrations and just submit a single One Stop Shop VAT return in their home country.
Remember – EU sellers with intracommunity sales of less than €10k don’t need to pay VAT outside of their home country.
You can read about the OSS here.
Low value import exemption (called consignment relief) ends
Up to 30 June there is no EU import VAT on consignments that have a value of less than €22 delivered from outside EU to consumers (B2C) within the EU. From July, this exemption stops. Instead, VAT must be charged at the point-of-sale for consignments of up to €150. But rather than pay VAT at the border for each shipment the exporter can account for and pay the import VAT via the Import One Stop Shop (see below).
Import One Stop Shop (IOSS)
For small imports (up to €150), rather than pay VAT at the border of each country, VAT can be declared and paid via the new Import One Stop Shop (IOSS). EU based businesses can register for the Import One Stop Shop in their home country and submit a single VAT return that includes all their small EU imports.
Non-EU businesses need to appoint an EU based intermediary if they want to use the Import One Stop Shop.
You can read about the IOSS here.
New Online Marketplace Rules
From 1 July 2021 the new Online Market Place (OMP) rules come into force. These rules oblige online marketplaces to become the ‘deemed supplier’ in certain cases. The deemed supplier rules apply when the marketplace is facilitating a B2C sale if:
- goods are sold (by anyone) when the import value does not exceed €150; or
- goods are sold by an overseas seller when the goods are located in the EU at the point of sale.
In this case the transaction is treated as two sales:
- first, a B2B sale to the Online Market Place (which means that the sales invoice is zero rated)
- second, a B2C sale by the Online Market Place to the final customer (which means that the OMP collects the VAT and pays it to the relevant authority).
You can read about this in our note.
Need for a fiscal representative
After 1st January many EU countries require overseas sellers that don’t have an establishment in the EU to appoint a local indirect fiscal representative. An indirect fiscal representative is a local business that is jointly and severally liable for VAT owed by the business.
Summary of the changes
| Abolition of distance selling thresholds | Individual country distance selling thresholds withdrawn Instead, single €10k threshold for all intra community sales EU based businesses have the option of submitting a Pan European VAT return for intra community sales through the One Stop Shop (OSS). |
| One Stop Shop (OSS) introduced | This is optional – EU sellers can still register in different countries The OSS allows for a single pan European VAT return for B2C intra-community sales UK sellers can use OSS if they appoint an EU fiscal representative. |
| Consignment relief ends | VAT exemption for imports under €22 ends Instead, importers must pay VAT on all imports Can pay VAT on everything up to €150 via IOSS. |
| Import One Stop Shop) introduced | IOSS is a pan European VAT return that applies to imports of less than €150 Its optional – you can still pay VAT at the border, or register for VAT in each country VAT will apply at the rates in the country the IOSS is registered UK sellers can use it only if they appoint an EU fiscal representative. |
| Online marketplace rules take effect | OMP rules that came into force in UK on 1/1/20 come into force in EU In some cases, OMPs become responsible for charging and collecting VAT. |
Purpose of note on EU VAT changes The purpose of this note is to provide a reminder to our clients of some of the EU VAT rules that come into place from 1st July 21. We have not explained all the rules, just those that we think are most relevant to our clients. You can read a summary of the […]