EU agrees to treat online market places as the seller when they facilitate sales of goods to EU customers
Following up on the EU Commission's 2016 Action Plan, the EU Economic and Financial Affairs ministers (ECOFIN) last month reached agreement on a new directive and regulation forming the second part of the Commission's VAT e-commerce package, which will come into force in January 2021. The new rules will extend the existing VAT mini one-stop-shop (VAT MOSS) into a one-stop-shop (OSS) covering all types of services, as well as intra-community distance sales of goods and distance sales of goods imported from non-EU countries by January 2021.
The rules introduce special provisions for online marketplaces, which will be treated as the seller when they facilitate sales of goods with a value up to EUR150 to customers in the EU by non-EU businesses using their platform. The same rules will apply when non-EU businesses use online platforms to sell goods from fulfilment centres in the EU, irrespective of their value, allowing tax authorities to claim the VAT due on those sales. Online platforms will also be expected to keep records of sales of goods or services made by businesses using the platform.
Member states will have until the end of 2020 to transpose the new rules of the VAT directive into their national legislation. Businesses wishing to make use of the OSS can start registering in member states from 1 October 2020.
In parallel, the OECD has also proposed VAT collection measures for digital platforms. Delegates from over 100 jurisdictions last month unanimously agreed new OECD rules at the Global Forum on VAT to make e-commerce marketplaces liable for the VAT/GST on sales made by traders through their online platforms.
DLA Piper Comment: Currently, businesses selling electronic services to non-taxable customers in the EU may register for the so-called mini-one-stop shop in one EU member state. The mini-one-stop-shop allows businesses to report and remit all VAT that is due in various EU member states in just one VAT return. The new VAT rules will extend the mini-one-stop shop to all types of services and the distance sale of goods, which means that many businesses may no longer be required to register or be registered for VAT purposes in various EU member states. As these new rules may result in lower compliance costs, we strongly recommend businesses review their supply chain and sales in the EU to assess whether VAT registration and associated compliance costs can be reduced.
The new VAT rules also introduce a liability for online platforms for unpaid VAT on the sale of goods with a value up to EUR150 by non-EU, third-party vendors on their platform. In order to avoid VAT liabilities, online market platforms are advised to implement sufficient safeguards that their non-EU suppliers are up to date with the payment of VAT.
Finally, we kindly note that Germany and the UK have already implemented regulations on the basis of which online platforms may be held liable for the unpaid VAT of EU and non-EU vendors that sell goods on their platform.