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From July, changes in VAT settlement for distance selling resulting from the EU directive. - Super Księgowy

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  • From July, changes in VAT settlement for distance selling resulting from the EU directive.

From July, changes in VAT settlement for distance selling resulting from the EU directive.

From July this year, the rules for VAT accounting for online sales will change drastically. Small purchases that were previously exempt from VAT will now have to pay and account for it. The changes apply not only to online stores but also to auction and social media portals. For example, it may happen that Allegro will start accounting for VAT for sellers using the portal.

The VAT e-commerce project – what will it entail?

The aim of the European Commission’s project is to limit the influx of packages with untaxed goods into the European Union. This affects both the budgets of EU countries and entrepreneurs from EU member states, as they cannot compete with sellers from the Far East selling the same products cheaper without VAT, sometimes even a quarter of the price. The VAT e-commerce project aims to curb this practice. The package primarily involves abolishing the VAT exemption in the EU for the import of small packages valued below 22 euros. Additionally, the scope of B2C transactions eligible for VAT purposes through the simpler OSS (One Stop Shop) procedure will be expanded. The obligation to pay tax will be imposed on taxpayers, making it easier to sell imported goods from third countries within the EU in shipments valued at no more than 150 euros and to deliver to customers via electronic interfaces. In addition to increasing the competitiveness of EU e-commerce businesses compared to sellers from non-EU countries, the costs of fulfilling VAT obligations for cross-border B2C transactions will also be reduced.

The One Stop Shop system

One Stop Shop (formerly Mini One Stop Shop, or MOSS) is a solution that, in simplified terms, requires suppliers or service providers to account for VAT in the country of consumption, which is the country to which they supply products or services and which is the place of residence or establishment of the customer to whom these products or services are delivered. However, the supplier’s registration in the OSS system is done in the country where the supplier is established or has its place of business. This is a significant simplification for businesses, as the requirement to register in each country to which a seller or supplier sends its products or services would be cumbersome, as these companies often sell products or services to multiple countries.

Reduction of sales thresholds for exceeding in destination countries

The VAT e-commerce amendment is turning the online sales model upside down, drastically reducing the sales thresholds above which such transactions will be subject to taxation in our country. Previously, these thresholds were calculated separately for each country and ranged from 35,000 euros to as high as 100,000 euros. With the new regulations coming into effect, this threshold will be reduced to just 10,000 euros and will be the same for all EU member states. Unfortunately, this will result in a significantly larger number of entrepreneurs needing to register for VAT in the destination country. The VAT-OSS procedure is intended to mitigate these inconveniences to some extent.

Taxation of e-commerce platforms with VAT

The new regulations also aim to shift the VAT reporting obligations from sellers to intermediaries who facilitate cross-border B2C transactions when the seller sells to private individuals or businesses through platforms or online portals, such as Allegro, for example. A special legal fiction will be created, resulting in the platform being recognized as the taxpayer. This means that the platform will be considered the seller and supplier of goods, even if only the actual seller is in a commercial relationship with the customer, and the platform acts as an intermediary. Why shift the VAT reporting obligation to platforms? The reasoning behind this is that there is one platform that gathers numerous small-scale sellers. Tax authorities find it easier to target the platform rather than all the individuals and companies selling through it. All changes in e-commerce will come into effect on July 1, 2021.