On March 20-22 2019, the OECD Global VAT Forum endorsed
measures proposed in its report, entitled 'The Role of Digital Platforms in the
Collection of VAT/GST on Online Sales’, that
address the VAT/GST treatment of digital platforms that
facilitate online transactions between two or more persons
(typically buyers and sellers).
The 87-page report included measures that would make
e-commerce marketplaces liable for VAT/GST on sales made by
online traders through their platforms. Therefore, this would
make it easier for tax authorities to ensure that tax is
collected on such transactions, i.e. monitoring a limited
number of platforms is easier than monitoring a multitude of
smaller businesses doing business through such platforms.
The report examined two possible models to ensure the
collection of VAT/GST in a world where online sales are
- The first model would make the platform fully liable for
the payment and remittance of VAT/GST on the online sales
they facilitate; and
- The second is a 'softer’ model, limiting the
responsibility of the platforms to assisting the VAT
authorities in the collection of VAT/GST.
The report also described possible ways in which this
assistance may work in practice.
It should be noted that OECD reports are not binding on
member states, but instead they aim to influence
countries’ tax policies by functioning as a
reference point and encouraging consistent approaches.
EU gets impatient
The EU did not await the approval of the OECD report and
instead issued a directive approved by the Economic and
Financial Affairs Council (ECOFIN) on December 7 2017, as well
as a proposal for an implementing regulation on December 11
2018, yet to be approved by the ECOFIN. The new rules form part
of the European Commission’s 2016 e-commerce VAT
package that becomes effective from January 1 2021.
Under the EU directive, platforms would be treated as the
seller of goods when they facilitate sales by non-EU sellers to
EU non-taxable persons (such as private customers); thus, they
would be responsible for paying the VAT due on the sales.
Platforms also would be responsible for the payment of VAT when
they facilitate imports within the EU of goods that have a
value up to €150 ($168), with the exception of alcohol and
tobacco products. The directive would abolish the VAT exemption
on low value imports with a value of €22 or less. The
platform would have to pay the VAT due in each EU member state
in which the customers or importers reside, using the
"one-stop-shop" scheme of their own member state. As a result,
the platforms would not have to VAT register in the member
state of the customers or importers but they would be required
to maintain certain records.
The EU thus opted for the full liability model because it
considers the lighter model to be inefficient (where platforms
assist tax authorities in the collection of the tax). The
underlying idea in the EU rules is to introduce a system which
ensures that non-EU sellers (and EU non-taxable persons
importing goods) fulfil their VAT obligations.
Digital platforms have until December 31 2020 to adapt to
these changes imposed by the EU rules.
This article was written by Christian Deglas, partner,
Michel Lambion, managing director and Eric Réolon,
director, at Deloitte Tax & Consulting Luxembourg.
Christian Deglas (firstname.lastname@example.org) and Michel Lambion (email@example.com)
Deloitte Tax & Consulting Luxembourg