ECOFIN adopts VAT e-Commerce package
Deloitte Malta Tax Alert
- Two-tier package
- Liability for marketplaces
- Further adaptations
- Further legislative work
During December 2017, the European Economic and Financial Affairs (ECOFIN) Council adopted legislative proposals made by the European Commission in December 2016 to amend the VAT rules for online sales of goods and services in Europe. The proposals included simplifications to the Mini One-Stop Shop (MOSS) regime for cross-border telecommunications, broadcasting and electronic services and a move to taxation at destination, with simplified declaration through a One-Stop Shop (OSS) for distance sales of goods. The Council has also introduced a VAT liability for electronic interfaces (such as online marketplaces) which facilitate supplies of low value goods imported from outside the EU and for sales made within the EU by non-EU based suppliers. The legislation is intended to enter into force in two phases, namely in 2019 and 2021.
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The ECOFIN Council has adopted the amended European Commission proposal on VAT rules for online sales of goods and services - see VAT on electronic commerce: New rules adopted. The legislative package consists of a two-tier package.
1) New rules from 2019 for TBE services
There will be changes from 2019 to the MOSS system, under which suppliers can declare cross-border B2C supplies of telecommunications, broadcasting and electronic (TBE) services. Changes include a derogation allowing EU micro-businesses to charge their home country's local VAT (or apply a local SME exemption) on supplies below a threshold of EUR10,000 of cross-border B2C supplies per year. Through this change, it is expected that two-thirds of businesses currently registered under MOSS would no longer be obliged to be so registered.
Furthermore, suppliers with cross-border B2C sales below EUR100,000 per year will be required to provide only one piece of evidence for the location of their customers and hence the country of taxation. This is another simplification aimed at reducing the administrative burden of VAT for SMEs.
In addition, to clarify the invoicing rules, from 2019 the Member State where a supplier is identified under MOSS will define whether a VAT fiscal receipt must be issued for such supplies. In this respect, Maltese VAT law already provides for a blanket exemption from the requirement to issue fiscal receipts in respect of services supplied under MOSS.
2) Overhaul of VAT rules for cross-border B2C supplies of goods from 2021
Further significant changes will apply from 2021 which impact the cross-border B2C supplies of goods (commonly referred to as distance sales). The intention is to replicate the marketplace rules for TBE and apply these to cross-border B2C supplies of goods.
Currently, B2C cross-border goods supplies are in many cases covered by the intra-EU distance sales regime, or by the import exemption for low value goods known as low value consignment relief. These arrangements will be superseded by new rules that should lead to wider taxation in the destination country.
Compliance with the new rules would be achieved through the use of different OSS systems to declare all cross-border B2C sales through a tax portal in one Member State:
- A first OSS would cover intra-Community distance sales of goods, B2C TBE services as well as other B2C services rendered by a taxable person outside their Member State of establishment (e.g. construction services or car rental). This would be accessible for EU and non-EU suppliers alike.
- A second OSS will cover distance sales of goods imported from third territories or third countries (non-EU), provided such goods have an intrinsic value not exceeding EUR150. Non-EU suppliers will only be able to use this OSS if they appoint an intermediary within the EU or are based in a country with which the EU has concluded an agreement on mutual assistance and the goods are dispatched from that same country. For goods sent to the EU by businesses not opting for this OSS regime, special arrangements will apply for consignments with an intrinsic value not exceeding EUR150 – logistics intermediaries will be able to declare and pay import VAT in a simplified way in the destination Member State.
Liability for marketplaces on B2C supplies by non-EU suppliers and imported goods
The adopted legislation goes beyond the original proposals, and will make marketplaces and electronic platforms liable for VAT on certain B2C sales which they facilitate. This will apply to distance sales of imported goods (by EU or non-EU suppliers) and to all B2C sales of goods made by non-EU suppliers (both within one Member State and cross-border). For goods arriving directly from outside the EU, this only applies for goods with a value not exceeding EUR150. Marketplaces will become the principal liable party for supplies covered by the scheme, even if the actual supplier is VAT registered in the country of destination. The reason for this measure is to counter cross-border fraud.
By taking this approach, the EU is aligning the responsibility of marketplaces for VAT collection on sales of goods with the existing responsibility for electronically supplied services sold through marketplaces, consistent with a number of jurisdictions that have implemented or are considering such an approach.
Further adaptations to the MOSS/OSS schemes
Certain amendments to the technical functioning of the MOSS will also come into force from 2021, regarding filing deadlines, corrections to past returns, and coordination of auditing of transactions reported under MOSS / OSS schemes.
Further legislative work
The European Commission is to draft implementation rules. An assessment is also required by the Commission by the end of 2019 on the readiness of the arrangements, which could potentially lead to postponement of the 2021 changes. Accordingly, whilst there is now some clarity on the rules for the future, uncertainty remains with respect to the precise timing of implementation.
These above changes cover B2C supplies only. In parallel, the so-called definitive VAT regime, which will cover B2B supplies, is proposed to enter into force from 2022.