People spend time daily on the
internet for work, study, and entertainment, which calls for life e-commerce, offering
a great possibility for businesses, since e-commerce is less costly than
traditional methods.
Buyers can select any goods
without geographic borders, and pay online, which makes it flexible. Regulation
and taxation of e-commerce, therefore, plays an important role for businesses nowadays.
Determining the governing VAT
provisions i.e.
taxation at the place of supplier or at the customer, VAT
calculation on transport costs, using the proper invoicing routines, rightful
application of rules for vouchers are all complex issues surrounding e-commerce,
but it’s good news that soon it will be made radically simpler from the aspect
of VAT.
Through its Digital Single Market
Strategy, the European Commission aims at simplifying VAT for companies
carrying out cross-border sales of goods or services (mainly online) to final
consumers (B2C), in line with the principle of taxation at destination.
The first measures introduced in
2015 covered telecommunication, broadcasting and electronic services
(TBC-services), the second package was adopted in December 2017 concerning the distance sales of goods and services supplied to final customers in the EU, and this VAT
e-commerce package will be implemented gradually.
In 2019, simplification became
available for microbusinesses and SMEs. First, an annual turnover threshold of EUR
10,000 is applied for intra-EU cross-border supplies of TBE-services, under
which supplies remain subject to the VAT rules of the member state of the
supplier. Secondly, for an annual turnover threshold of up to EUR 100,000, the
vendor must only keep one piece of evidence (instead of two) to identify the member
state of the customer. For invoicing, the rules of the EU country of
identification of the supplier remains applicable.
In 2021, the extension of the Mini
One-Stop-Shop (MOSS) scheme to One-Stop-Shop (OSS) will reduce administration
dramatically: the non-Union scheme for supplies of TBE-services by taxable
persons not established in the EU will be extended to all types of cross-border
services to final consumers in the EU; while the Union scheme will be extended
to all types of B2C services as well as to intra-EU distance sales of
goods, parallel with the abolition of the current
distance sales thresholds.
This is in line with the
commitment to apply the destination principle for VAT, and will result in online
businesses being able to handle EU-wide VAT compliance from home, directly
through their tax administration.
Special provisions concerning the
obligations of electronic interfaces will enter into force on January 1, 2021
as well. Businesses operating such marketplaces or platforms will, in certain
situations, have to collect and pay the VAT on behalf of their users for the
supply of goods into the EU.
An import scheme will also be created
covering distance sales of goods imported from third countries to customers in
the EU up to a value of EUR 150. The seller will charge and collect the VAT at
the point of sale to EU customers, declare and pay that VAT in the member state chosen for the OSS registration. These goods
will then benefit from a VAT exemption upon importation; while the current VAT
exemption for goods in small consignment will be abolished. Alternatively, where
the import OSS is not used, the customs declarant will have to collect import
VAT from customers and pay it to the authorities via a monthly payment.
These simplification measures may
facilitate more the online sales and going abroad for businesses. However,
proper taxation and a sufficient administrative setup remains increasingly
important. Good compliance also provides business opportunities by creating the
way to analyze business and provide management information for better
development decisions.
