EU revamps VAT rules for e-commerce businesses

The EU is set to overhaul the VAT rules for e-commerce businesses which means businesses will have to electronically declare and pay the VAT for all their intra-EU sales in a single quarterly return

The new VAT rules for e-commerce for EU business will be introduced on 1 July 2021.

The EU will launch the VAT One-Stop Shop portal (OSS), a new platform for businesses and taxable persons. The new rules are significant for anyone selling goods online or running an online marketplace.

This replaces the previous system where online companies were obliged to register for VAT in each EU country before they could sell to consumers there. The new system should save businesses up to 95% or up to €2.3bn (£1.9bn) a year in compliance costs, the EU claims.

The new rules aim to ensure that VAT is paid where goods are consumed or paid services are provided, create a uniform VAT regime for cross-border supplies of goods and services, introduce a level playing field between EU businesses and non-EU sellers, and offer businesses a simpler system to declare and pay their VAT in the EU using the Import OSS (IOSS)

The EU said that the new rules ‘will lead to a speedier, more efficient cross-border online shopping experience for both businesses and customers. It will simplify life for businesses that sell goods online, while ensuring a more level playing field with online companies from outside the EU’.

The introduction of the IOSS will simplify the collection, declaration and payment of VAT for sellers that are supplying goods from outside the EU to customers in the EU.

In a statement, the EU said: ‘In practice, this means that these suppliers and electronic interfaces can collect, declare and directly pay the VAT to the tax authorities of their choice, rather than having the customer pay the import VAT at the time the goods are delivered to them.’

The rules are also set to help tackle the EU VAT gap, which was estimated at €140bn in 2018 and since the pandemic started, has grown to a staggering €164bn in 2020. It is hoped that the new VAT e-commerce rules will support efforts to reduce the figures.

Finally, the current VAT exemption for packages entering the EU with a value not exceeding €22 will be abolished. This exemption has been introduced to stop sellers fraudulently declaring high-cost goods, such as smartphones, at a lower price only to benefit from the exemption. This undercut EU companies who had no choice but to charge their EU customers the full VAT rate on the same products.

Ruby Flanagan |Reporter, Accountancy Daily

Ruby Flanagan is reporter on Accountancy Daily. Contact her on

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