The European Commission has adopted a package of proposals to facilitate cross-border B2C e-commerce in the EU (see www.bit.ly/2gLHVns). The majority of the proposals were set out in the Commission’s recent VAT action plan.
The proposals include:
- a new threshold to be introduced in 2018 which allows small businesses to account for VAT in their home jurisdiction if their cross-border turnover on supplies of e-services is less than €10,000
- the process will also be simplified for businesses whose cross-border turnover is less than €100,000 by only requiring them to obtain one piece of evidence for identifying the location of their customers, rather than two.
- The mini-one stop shop (MOSS) which already applies to e-services will be extended in 2021 to the online supply of goods, to allow online businesses to account for VAT under a single quarterly return via a portal in their home jurisdiction. The thresholds set out above will then also apply to goods sold online from 2021. This proposal is intended to be less costly for businesses that will no longer need to register in multiple jurisdictions.
- The current exemption from VAT for imports worth less than €22 from outside the EU will be removed from January 2021, on the basis that it leads to unfair competition for EU companies who have to charge VAT on the supply, and creates the opportunity for VAT fraud by mis-declaring the value of goods.
- electronic publications – Member states will also be able to apply the same reduced or zero rate to as they do to their printed equivalents. Under the current rules, e-publications must be taxed at the standard rate. This change will enter into force once the proposal is agreed by all member states.
Why it matters
In addition to e-book suppliers, these measures should be welcomed by all SME cross-border businesses, which should benefit from reductions in EU VAT compliance costs. It seems likely however, that the UK will have left the EU by the time most of these changes come into effect. This does not mean that UK businesses selling into the EU can ignore the changes. It is just that they are likely to lose the ability to use the MOSS in the UK. They will therefore need to register in each EU country or register to use the MOSS in another EU country.