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EU changes VAT liability for transactions facilitated by digital platforms

Digital platforms have until December 2020 to prepare for changes introduced by the EU, which will require digital platforms to pay VAT on behalf of their non-EU sellers and on import of goods into the EU.

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 booming:

  • 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 ( and Michel Lambion (
Deloitte Tax & Consulting Luxembourg

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