New VAT Rules for the Digital Economy, targeting electronic commerce, have recently been approved by ECOFIN. The rules are expected to gradually enter into force on 1 January 2019 (for electronic supplied services) and 1 January 2021 (for distance sales of goods) and promise cost savings for businesses and tax revenue increase for the EU Member States.
Primarily the new rules will implement the following salient changes:
(1) The simplification of VAT handling for small EU-based businesses offering telecommunication, broadcasting or electronically-supplied services (e.g. websites, software, music, films and games) to non-taxable persons (“consumers”) from other EU Member States.
These services are in general subject to VAT in the country of the customer. The Mini One-Stop-Shop (MOSS) regime was introduced in 2015 to avoid VAT registration requirements (and the related VAT compliance burden) in various EU Member States. From 1 January 2019, businesses can pay VAT at their home rate and in their home country, unless their annual revenues from cross-border sales exceed €10,000.
(2) As of 1 January 2021, the MOSS regime will be extended to cover intracommunity sales of goods to non-taxable persons. The country-specific EU distance sales thresholds of either €35,000 or €100,000 will be replaced by one EU-wide threshold of €10,000 annually. Domestic VAT rates apply to international sales below this threshold. If the threshold is exceeded, international VAT rates would then apply. The MOSS will also be implemented for certain B2C imports. It will apply for products not subject to excise duties with a value of less than €150 per import. These imports will be taxed at the rate of the customer’s Member State. Consequently, the existing VAT exemption for consignments with a value of less than €22 will be abolished.
(3) As of 1 January 2021, electronic marketplaces including platforms or portals that facilitate either intracommunity distance sales by businesses not established in the EU, or facilitate distance sales of goods imported into the EU with a value not exceeding €150, will be liable to pay VAT in the Member State where the customer is located. According to the new VAT rules, such marketplaces will be deemed commissionaires who have bought and now sell the products traded on their platforms.
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