Very important provisions of the EU e-commerce VAT package take effect from July 1 2021.
In Poland, the bill to transpose the EU directives into domestic law is still pending certain legislative stages, but the anticipated effective date should remain.
The new EU rules will generally affect all businesses, not only the Polish ones, that are involved in selling goods to customers (B2C) in the EU (both traders who sell goods to consumers in the EU and transport of the goods).
The core of the VAT e-commerce package rules refers to:
- Cross-border B2C supplies of goods within the EU (intra-Community distance sales);
- Cross-border B2C supplies of goods from a non-EU country to a EU member state (non-EU distance sales); and
- B2C supplies via internet platforms.
At present, distance sales means the B2C intra-EU supplies of goods with transport. In practice it refers to transactions made via the internet. Currently, suppliers making distance sales that do not exceed a sales threshold (set separately by each EU member state, i.e. €35,000–€100,000) may decide to charge local VAT in the country of destination.
However, once the sales threshold is exceeded for a specific country, the supplier must register for VAT purposes and settle local VAT in the country of consumption.
As of July 1 2021 new regulations will affect distance sales by:
- Abolishing specific country thresholds and introducing one EU-wide threshold of €10,000 below which the supplies of intra-Community distance sales of goods may remain subject to VAT in the member state of establishment (i.e. where goods are located at the time when their dispatch/transport begin); and
- Introducing a possibility to use one registration (in the country of identification) for purposes of VAT settlements in all EU countries where goods are transported – the VAT one-stop-shop (OSS), in fact the extended mini-one-stop-shop (MOSS).
Generally, there will be certain advantages of using the new VAT-OSS system such as:
- One VAT electronic registration for VAT purposes which means that a taxpayer avoids an obligation to register for VAT purposes in many EU member states to which goods or services are sold; and
- VAT settled by a single return submitted to one EU member state of identification; and
- Cooperation with the tax authorities of the EU member state of identification even in situations of cross-border distance sales.
Of course, there are also some disadvantages like the necessity to use VAT rates applied in the consumer's country. Taxpayers should be also aware that the member state of destination still remain competent to audit the VAT settlements reported via VAT OSS.
All in all it seems however that using the new VAT-OSS system, which is not obligatory, might be very attractive for VAT taxpayers.
Import of goods
Currently, B2C imports of goods from third countries are taxed at import. However a VAT exemption generally applies for imported goods in consignment arrangements and having a value not exceeding €22. Since the exemption is subject to VAT fraud it will be revoked in the EU member states.
At the same time for remote sales of goods imported from third countries (via consignments) having a low value but not exceeding €150, the import-one-stop-shop (IOSS) could be used to declare and settle the VAT liability. Import VAT on distance sales of goods from outside the EU may be also collected by the customs declarant such as a postal operator, courier firm or customs agent.
Another change under VAT e-commerce package refers to business facilitating supplies through the use of an online electronic interface (internet platform, marketplaces, portals).
As of July 1 2021 the platform will be deemed for VAT purposes to have received and supplied the goods themselves even though it will not be the actual supplier of certain goods. Such a situation will be a new one in the VAT system and triggers additional duties in respect of VAT collection and remittance for e-commerce platforms in specific transactions. In addition, new record keeping requirements are to be introduced for online platforms facilitating supplies of goods and services.
Impact on businesses
It is not easy to give a concrete answer on the impact of the VAT e-commerce package rules on businesses. It depends on the specific entrepreneur’s positions. For some businesses the new VAT rules generally should simplify VAT obligations (i.e. for those making high value intra-EU distance sales to many EU countries) while for the others not (making low value shipments of goods into the EU or internet platforms). The fact is that every taxpayer involved in selling goods to customers in the EU should analyse its VAT position carefully.
A detailed analysis of the VAT e-commerce package shows that the new VAT rules are getting more complex. Even though the e-commerce directives have not been implemented in some EU countries (including Poland) there is not much time to prepare for the new settlements.
Among others, businesses should consider existing VAT registrations that may need to be changed or cancelled, IT/accounting systems that might need to be adjusted so that the new reporting obligations will be met, a compliance rules and tools or system to monitor the VAT rates in the various member states should be implemented to enable a timely adjustment of sales prices.
Additionally, there might be a need to review existing legal contracts or terms and conditions to help manage the VAT risks associated with the new requirements, especially regarding relationships with logistics service providers or marketplaces.
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