Decision on simplifications VAT rules for e-commerce delayed

On 1 December 2016 the European Commission published its legislative proposal for a significant modification of the VAT rules for online sales of goods and services in Europe during the period 2018-2021. This proposal, as amended during the Estonian EU Presidency, was on the agenda of the 7 November 2017 Economic and Financial Affairs (ECOFIN) Council with the aim of reaching a political decision. However, due to the lack of unanimous approval on the current proposal, this decision has been delayed until the next meeting on 5 December 2017.

9 November 2017


As a reminder, the December 2016 proposals are aimed at making it easier to buy and sell goods and services online (we refer to our Indirect Tax Alert of 5 December 2016). They are part of the EU's 'digital single market' strategy. The aim is also to improve the collection of VAT on digital services. The proposals consist of a two-tier package of measures:

  • Short-term improvements to the Mini One Stop Shop (MOSS) system, with which businesses can declare cross-border B2C supplies of telecommunication, broadcasting and electronic services since 2015. The proposal also includes a derogation allowing EU micro-businesses to charge their home country’s local VAT on cross-border sales below a threshold of € 10,000 annually. For businesses with cross-border sales below a threshold of € 100,000 annually a simplification of the proof that the service is taxed in another Member State is included.
  • From 2021, the proposal foresees an overhaul of the rules applicable to cross-border B2C supplies of goods (distance sales) leading to effective taxation in the destination country, for goods dispatched from either within or outside Europe. The proposals include abolition of the threshold for distance sales and the exemption for importation of small consignments. Compliance by businesses with these new rules would be ensured through the use of a One Stop Shop (OSS) system to declare all EU sales through a tax portal in one Member State. 


Since the original proposal was published, certain amendments were made by the European Commission to meet the reservations and expectations of Member States. As a result, the Estonian EU Presidency published a compromise including the following amendments:

  • The implementation date for the administrative simplifications initially scheduled for 1 January 2018 has been postponed until 1 January 2019;
  • EU micro-businesses, residing in only one Member State, performing cross-border B2C supplies of telecommunication, broadcasting and electronic services of which the total value remains below a threshold of € 10,000 annually are allowed to charge their home country’s local VAT on sales. The amendment states more clearly that in order to decide whether the threshold has been exceeded only services supplied to non-taxable persons need to be taken into account. In the proposal this derogation is extended to distance sales of goods with effect from 1 January 2021. These supplies also need to be taken into account with regard to exceeding the threshold. If the total value remains below the threshold, the distance sales are subject to VAT in the country of dispatch;
  • The definition of distance sales of goods has been amended, apparently with the purpose of covering as many B2C sales of goods as possible in the new distance sales scheme. Not only supplies of goods dispatched or transported by or on behalf of the supplier, but also supplies where the supplier intervenes indirectly in the transport or dispatch of the goods are covered by the scheme. As a result, arguably, only supplies where the consumer intervenes directly in the transport and the supplier is not involved will not be covered by this scheme.
  • In the original proposals non-EU companies were allowed to apply a special scheme to declare import VAT for the importation of goods of an intrinsic value not exceeding € 150 in three different situations: 1) by way of appointing an intermediary, 2) in case the non-EU company is established in a country with which the EU has concluded an agreement on mutual assistance, and 3) in case the company is duly authorised by the Member State of identification. In order to be authorised the company had to meet the conditions similar to the conditions to obtain the status of Certified Taxable Person (CTP), part of the recently published plan for a definitive VAT system. The possibility for non-EU companies to be authorised has been deleted;
  • The taxable person not established within the EU making use of the special scheme for the importation of goods of an intrinsic value not exceeding € 150 has to submit a VAT return for each calendar month instead of each calendar quarter;
  • If the taxable person cannot or does not wish to apply the special scheme for payment of import VAT for the importation of goods of an intrinsic value not exceeding € 150, the Member State of importation should allow the taxable person to report the VAT due electronically in a monthly declaration. Originally, only the standard VAT rate could be used in that declaration. The amendment introduces the option for Member States to make the application of the standard VAT rate obligatory;
  • The Member State of identification (for EU-based companies their home country and for non-EU companies the Member State of their choice) will continue to play a leading role in coordinating the information requests and administrative inquiries. However, contrary to the original proposals, it will not receive a fee relating to the total amount of VAT collected under MOSS and the special scheme for payment of import VAT for the importation of goods of an intrinsic value not exceeding € 150;
  • The provision that in cases where the Member State of identification does not agree on the need for a VAT audit, but it is obliged to audit the company anyway if at least two Member States of consumption (where the supply is subject to VAT) consider that an audit is necessary, has been deleted.

Marketplace liability

The amendments mainly concern making electronic interfaces (such as platforms, marketplaces and portals) liable for collecting VAT on certain cross-border sales to private consumers that they facilitate. This was not foreseen in the Commission's proposals, but has become an essential provision of the package. A similar liability is already in place for the supply of electronic services within the EU.

The current draft version foresees a new article 14a in the European VAT Directive, in which online platforms themselves are deemed to have received and supplied goods subject to so-called distance sales that they facilitate (the ‘deemed supplier concept’). The deemed supplier concept is limited to supplies facilitated for non-EU companies. For goods arriving directly from outside the European Union, it only applies for goods with an intrinsic value not exceeding
€ 150. Furthermore, online platforms facilitating the supplies are obliged to keep records of those supplies.

The rationale for this measure is the existence of cross-border fraud mechanisms whereby goods imported for distance sales enter the EU VAT-free, in some cases through such marketplaces. In such scenarios, it is difficult for Member States to address the initial overseas vendor in order to collect the VAT due. By introducing a deemed supplier concept, the European Member States hope to tackle this issue.

As part of the proposal package, the Commission would be tasked with drafting Implementation rules for the deemed supplier concept, in line with the Better Regulation Guidelines including stakeholder consultation and impact assessment. Further rules about the moment when a platform facilitates a supply, how the transport or the dispatch can be attributed to the supply by e.g. a platform to the consumer, and the general obligations for electronic interfaces are expected to be defined in these Implementation rules.

ECOFIN Council discussion

In general, the governments of the Member States, including the new Dutch government, supported the European Commission’s amended proposal. Although it was rumored that certain Member States had reservations regarding the implementation of marketplace liability in the run up to the Council meeting, no direct opposition was raised on this concept when the meeting took place.

However, the German delegation could not agree with the proposal, raising two issues to address:

  • The extension of the OSS to all distance sales of goods and cross border services to end consumers, since it greatly reduces the capacity of the destination Member State to supervise VAT collection;
  • The elimination of the VAT exemption for imports of small consignments (value below € 22), which could lead to consumers being charged VAT upon parcel collection.

In view of the unanimity on most topics, the European Commission and Member States committed to undertake further technical work with a view to reaching an agreement during the next meeting of the ECOFIN Council on 5 December 2017.

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