E-commerce business

E-commerce business

Get ready for a rollercoaster ride

New VAT rules for e-commerce

E-commerce businesses selling products to EU-consumers will be facing significant changes as of July 1 2021. As from July 1, the new VAT rules for e-commerce will be in effect. These changes will have a substantial impact on your tax and business processes. If handled wisely they can also be the starting point of new opportunities. How will the new VAT rules impact your e-commerce organisation? We will explain your options below and advise you on everything you need to know about the new VAT legislation.

What do I need to know?

We know you have more exciting things to do, so we will keep it short and simple. Click on the following subjects to find out how this might impact your business, and what steps to take to stay ahead of the game.

This new legislation concerns your e-commerce business when your sales are considered “distance sales”, because the following conditions are met:

  • You sell goods to consumers  (private persons or businesses without a VAT-number) in other EU-countries than the country where your business is established.
  • You are involved in the transportation of goods to consumers
  • You have a revenue of at least €10.000 per annum from selling goods or digital services to consumers in other EU- countries

As of July 1 2021 the threshold for the application of the current distance sales legislation will be abolished. This means that all your deliveries to consumers in the EU are taxed, for VAT purposes, in the EU-country of the consumer. Therefor you would have to register and pay VAT in all EU-countries where your consumers are located.

Fortunately the legislators have introduced an administrative facilitation, called the (I)OSS. With the (I)OSS you can file one VAT return for all your distance sales to customers in the EU. This means you don’t have to register and pay VAT in all the countries that your consumers are located in. Consequently, non-EU businesses can pick a country of choice to register for the (IOSS)

Does your e-commerce business sell goods from outside the EU to EU consumers? Then you probably want to take advantage of the new IOSS system. The IOSS system is applicable on distance sales of goods from outside of the EU, when the value of the consignment does not exceed €150. The IOSS system provides the following benefits:

  • From 1 July 2021 the VAT exemption for the importation of small consignments up to a value of € 22 is abolished. But if the IOSS is used, the importation of the goods is still exempt from VAT. Therefore VAT is only due on the deliveries to the consumers in the EU (the distance sales).
  • With a single IOSS return you can file and pay the local VAT that is due on the distance sales to your consumers. This means you don’t have to register and pay VAT in all the EU countries that your consumers are located in. The EU-country of the IOSS registration will send the VAT return and the paid VAT to the EU-countries where the VAT is due.
  • When you are filing local VAT returns in the countries of your consumers, you are subjected to the invoice requirements of that country. When using the IOSS for filing the local VAT, there is no obligation to issue an invoice to the consumers. You can however still opt to issue an invoice. This will only need to meet the invoicing requirements imposed by the country of the IOSS registration.

To apply the (I)OSS system, registration is necessary. Businesses established within the EU need to register in the country of establishment. Businesses established outside of the EU can register in a country of choice. Businesses established outside of the EU (except for entrepreneurs from norway ) will also need to appoint an EU-established intermediary. The Netherlands is a great option for the IOSS-registration and for the importation of goods. This is the case because of the possibilities provided by the Dutch import legislation. Check out the next article to learn all about this legislation.

The Netherlands is a great option for the importation of goods and for your IOSS-registration. This way you can benefit from our Dutch import VAT ‘exemption’, regarding the importation of goods that are not covered by the IOSS system. This is a license, that enables you to import goods into the Netherlands without paying import VAT. This licence is called an article 23-licence. Instead the VAT is declared and recovered in the next VAT return. Which results in cash flow benefits for your business.

From 1 July 2021, new VAT rules will take place concerning e-commerce via platforms.

The new rules introduce the fiction that if goods are sold via a platform, according to VAT legislation two transactions take place. The goods are deemed to have been supplied by the supplier to the platform and by the platform to the consumer in the EU. As a result of this, platforms are responsible for the VAT on the sales to the consumer. This fiction takes place in the following situations:

  • Goods that are imported from outside the EU are sold to consumers in the EU, in consignments with an intrinsic value of no more than €150.
  • A business established outside of the EU sells goods from a storage inside the EU, to consumers in other EU-countries than the location of the storage.

No VAT is due on the supply of goods by you to the platform. Instead of invoicing the consumers, you will have to invoice the platform. So you can relax and let the platform deal with the VAT responsibly on the delivery to the consumer

  • Because of the new VAT-legislation, your deliveries to EU consumers are probably subjected to local VAT in the country of the consumers. This means that different VAT rates from multiple countries might apply to your deliveries. This impacts the pricing of your products and needs to be implemented in the ERP and IT systems.
  • You have to decide if using the (I)OSS-system is beneficial. In some cases is might be useful not to register. This is the case, when you have high costs in other EU-countries. By filing local tax returns the paid VAT can immediately be reclaimed on the local VAT return, which results in cash flow benefits.
  • Instead of invoicing consumers you might have to invoice the platform, due to the new platform fiction.
  • If your business is established outside of the EU, you have to choose a EU-country for the (I)OSS registration. In that case you also need to appoint an EU established intermediary for the registration.
  • Your administration should be in order to clearly document what address the goods are transported to.

In the upcoming weeks the legislators will publish more details about the new rules. Keep following us, so you don’t miss out on any updates.

More information

More information

In the upcoming weeks the legislators will publish more details about the new rules. Keep following us, so you don’t miss out on any updates. If you have any questions or comments, please feel free to contact us by e-mail: info@flynth.nl.