EU VAT changes from 1 July 2021: E-commerce and more
29 Oct 2020
Frequently asked questions
In September 2020, the EU published explanatory notes on the new VAT e-commerce rules being implemented from 1 July 2021.
The rules impact:
- Sales of goods imported from outside the EU carried out by suppliers and deemed suppliers (these are specifically defined stakeholders that include online marketplaces) except for goods subject to excise duties.
- Sales of goods to private individuals made from one EU member state to another by suppliers or deemed suppliers.
- Domestic sales of goods by deemed suppliers.
- Supplies of certain services by taxable persons (suppliers who are required to be registered for VAT in the EU) not established in the EU or by businesses established within the EU but not in the Member State where an individual, or other non-taxable final consumer consumes the service
We have prepared a series of questions to address the important issues that UK businesses should be mindful of.
How is OSS (one-stop shop) different from the current MOSS (mini one-stop shop)?
OSS is the extension to MOSS because additional categories of supplies will be reported through the multi-jurisdiction VAT return process. Currently, the MOSS covers B2C supplies of broadcasting, telecommunication and electronically supplied services (collectively known as BTE). The scope of the OSS will include BTE, but also:
- Supplies of goods sold to final consumers (B2C) which are currently covered by the VAT distance selling regulations;
- Services supplied by online marketplaces; and
- Other services supplied on a B2C basis.
What does IOSS stand for and what does it mean?
IOSS is a new mechanism that stands for ‘import one-stop shop’. It is being introduced as the rules are changing on low value imports into the EU. Low value consignment relief is being abolished and all commercial goods imported into the EU from the UK will be subject to VAT regardless of their value. Payment of the import VAT by the non-EU supplier can be managed through the IOSS.
What are the advantages of the OSS?
The OSS simplifies VAT compliance obligations for businesses selling goods and supplying services to final consumers throughout the EU, allowing them:
- To register for VAT electronically in one single Member State for all the eligible sales of goods and services to customers located in all the other 26 Member States;
- To declare in a single electronic VAT OSS return and to make a single payment of the VAT due on all these sales of goods and services;
- To work with the tax administration of the Member State in which they are registered for the OSS, and in one language, even though their sales are EU-wide.
Which additional B2C services will be required to be reported under the Non-Union OSS?
The following B2C services supplied to EU residents can be reported under the OSS, where the place of supply of these services is in the EU:
- Accommodation services provided by suppliers established outside the EU
- Admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions;
- Transport services;
- Services of valuation and work on movable tangible property;
- Ancillary transport activities, such as loading, unloading, handling or similar activities;
- Services connected to immovable property;
- Hiring of means of transport; and
- Supply of restaurant and catering services for consumption on board ships, aircraft or trains etc.
Are registrations for MOSS, automatically transferred to OSS?
Yes, the OSS is an extension of the MOSS (and is therefore being renamed). It is the same registration so no further steps are required in order to apply the OSS simplification for those traders already registered for the MOSS.
UK businesses already registered for the Union MOSS at 31 December 2020 will need to register for the Non-Union MOSS from 1 January 2021, unless an agreement is reached with the EU prior to the end of the transition period on 31 December 2020. It is then this Non-Union MOSS that extends to the Non-Union OSS from 1 July 2021, for UK traders.
Where are the registration portals for the OSS and IOSS?
The portals are part of the tax compliance systems operating by each EU Member State. From 1 January 2021, the UK will no-longer have such a platform as it will be a third country from an EU perspective and will be out of the EU VAT system.
Many of our clients are considering registering with the tax authorities in the Republic of Ireland or The Netherlands.
Are there any thresholds to the new reporting requirements?
The existing distance selling thresholds are to be abolished and there will be a new EU-wide threshold of EUR 10,000 which covers the supply of goods, BTE and other services where applicable. Under this threshold, these type of B2C supplies will remain taxable in the Member State where the supplier is established. This threshold is not applicable to non-EU resident suppliers and therefore will not apply to UK businesses. UK businesses will have to comply with the EU VAT requirements as a result of making one supply regardless of value, unless an agreement is reached between the UK and the EU.
Are B2B supply chains impacted by these new rules?
The e-commerce VAT rule changes do not directly impact B2B supply chains.
Do fiscal representatives need to be appointed if registration for the OSS is required?
Fiscal representatives do not need to be appointed for registration and compliance through the OSS. However, a fiscal representative will need to be appointed for registration and compliance for the IOSS by non-EU based businesses (subject to any mutual assistance agreements between the respective countries). This could mean that UK businesses are required to appoint fiscal representatives.
I am a UK supplier of software to consumers in the EU. How do the changes affect me?
Registration for the Union MOSS may be required for transactions taking place prior to 31 December 2020. Thereafter, and before 1 July 2021, registration for Non-Union MOSS would be necessary as the UK will no longer be a member state of the EU for VAT purposes. That registration would then convert to OSS from 1 July 2021.
The video game I have developed is sold by platforms such as Apple Store and Google Play. How do these new rules affect my supply chains?
Under new rules, these supplies are facilitated by use of an electronic interface (EI), which is involved in the collection of VAT on those supplies. The EI (the likes of Apple and Google) will be a deemed supplier for B2C services supplied in the EU from non-EU countries such as the UK. Similar rules regarding EI and deemed suppliers, relate to the supply of goods to EU final consumers.
The rules regarding EI are complicated and if your goods or services are sold via an EI, further advice should be sought in advance of 1 July 2021.
My business will ship consumer goods to the EU to fulfil specific online retail orders. Do I need to register for VAT in the EU next year?
Registration for the IOSS will be necessary for consignments not exceeding EUR 150. If UK businesses do not register and pay the import VAT through IOSS, the consumer will have the liability of paying the import VAT required before their goods are delivered to them, making the UK goods less attractive to purchase. Registration for IOSS is therefore more favourable if the goods and services are widely available from other suppliers.
If supplies are made via an EI, the EI may have the VAT liability to settle depending on the specific circumstances.
In cases where the supplier is not registered for IOSS and an EI is not involved in the supply chain, a VAT registration in the Member State of destination may be required.
Our business operates a website from which third parties sell their goods and services to the global consumer market. Am I considered an ‘electronic interface’?
The concept of an EI is a broadly defined one and incorporates websites, portals, gateways and marketplaces. Online e-retail sites such as Amazon are considered EI under the new rules, but the term does apply to smaller scale operations which enable vendors and consumers to communicate and complete a transaction, through a device or electronic programme.
In some instances, the operators of EI will be the party liable for accounting for VAT within the EU on B2C supplies of goods and services.