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Expected impact of new EU-VAT legislation in 2021 (or 2022?)


Contributed by Kreston
October 12, 2020



Cor van Gessel, Tax Advisor, Van Herwijnen Kreston, Netherlands

On 22 July 2020. the European Council agreed to implement the VAT e-commerce package. The most important changes are:

  • The scope of the distance sale rules is broadened: supplies of goods where the supplier intervened directly or indirectly with the transport will be considered as distance sales.
  • The current various thresholds in the EU member states (ranging from EUR 35,000 to EUR 100,000) will no longer apply. Instead, the current One Stop Shop system will be extended and will also apply for distance sales; the seller will be allowed to opt for the import-OSS (I-OSS). However, the I-OSS system can only be used for goods with a maximum value of EUR 150.
  • The current VAT exemption for import of goods up to a value of EUR 22 will no longer apply.

As mentioned above, the proposed effective date of the new rules is 1 July 2021. These rules were initially supposed to enter into force as of 1 January 2021, but due to COVID-19 this change has been postponed. This summer, the Dutch government announced that they will request the EC to further postpone the implementation of the e-commerce package to 1 January 2022.

What about Brexit?

Until 31 December 2020, the UK will continue to be treated as an EU country. UK distance sellers are allowed to use the thresholds mentioned above. Until that date, then, UK distance sellers only have to deal with VAT compliance obligations in other EU member states if threshold(s) are exceeded.

We don't know if UK distance sellers will still be allowed to opt for the current distance sales rules after Brexit, because these rules only apply between EU countries. If (from 1 January 2021) the distance sales rules no longer apply for UK sellers, that would mean that they have to pay import VAT when the goods enter the EU, and it would also mean that they will be obliged to register for VAT purposes in these EU countries.

As from 1 July 2021 (or 1 January 2022?), UK distance sellers will be allowed to opt for the I-OSS rules, provided the value of the imported goods does not exceed EUR 150.

Fiscal representative

According to the I-OSS rules announced by the EU, EU countries could oblige the seller to appoint a fiscal representative in the EU countries. Currently, the Dutch tax authorities demand that a fiscal representative is appointed if a non-EU seller makes distance selling transactions in the Netherlands. Therefore it is safe to presume that the Dutch tax authorities will also demand that a fiscal representative will be appointed if a non-EU seller opts for the I-OSS rules.

Conclusion

The new legislation could have a considerable impact for distance sellers, especially for UK distance sellers. If you have any questions regarding the impact, we are happy to assist you.

 

Tags: value added tax (VAT) | VAT legislation | European Union (EU)

 

 

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