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New VAT Regulations for e-Commerce

in Tax

On July 1, 2021, the new Community regulations on distance sales, carried out by a businessman or professional to a private consumer located in a European Union member country, will come into force.

VAT rules and regulations

The current situation is as follows:

1. There are differences in taxation for VAT purposes between deliveries of goods of low value (less than 22 euros) if they come from third countries or European Union countries. Thus, while these supplies are exempt from VAT if they come from third countries, when they come from European Union countries they are subject to and not exempt from VAT, which causes clear commercial discrimination and situations of distortion in competition.

2. In intra-community distance sales to private end customers, different thresholds are established in each European country from which tax must be paid at destination. This causes administrative and management complexities because there is no unified criterion at European level.

Rules

EU VAT regulations

In order to avoid trade discrimination between countries and to unify criteria at European level, a tax and customs reform has been established for VAT purposes for EU countries.

The main novelties are the following: 

1. The VAT exemption on imports of goods with a value of less than 22 euros will be repealed so that imports from countries outside the European Union will be subject to VAT in the European country of destination of the goods. However, the exemption from customs duties for imports of a value of less than 150 euros is maintained.

2. Responsibility for paying VAT on the platforms that act as intermediaries for distance sales of goods imported from third countries to private EU customers. This implies that Amazon-type platforms will be considered as sellers for VAT purposes when the selling entrepreneur is established in a third country.

3. The threshold for intra-community distance sales in each country is 10,000 euros in the calendar year in all European countries. Below this threshold, supplies of television, radio and electronic services, as well as intra-Community supplies of goods, may be subject to VAT in the Member State where the taxable person is established, presenting VAT settlements in their own country. However, it is possible to choose to pay tax at the destination for all distance sales made to the same country, with a two-year stay.


eCommerce


In the event that the established threshold of 10,000 for distance sales to European Union countries is exceeded during the calendar year, business people must apply the VAT rate of the country of destination, but when it comes to paying it, it will be allowed to do so from the country where they are established, i.e., the obligation to register in each EU country is eliminated, and each country’s VAT can be paid by presenting the corresponding declaration in the country where it is established (a form equal or similar to the current Form 368 will be applied, depending on how the Community regulations are integrated).

Therefore, if it is a company established in Spain, it will be possible to settle the VAT charged in each EU country by presenting the corresponding declaration to the AEAT, simplifying the obligations and lowering the VAT management costs of the companies concerned. Now all that remains to be seen is whether the application of this measure will be postponed again until 2022 or whether it will actually be implemented, as has been said, from 1 July 2021.


Now we only need to wait to know if these new measures are going to be applied in July 2021 or at the beginning of the year 2022.

If you have any questions about this or similar issues, please do not hesitate to contact our tax advisors here at GM Tax Consultancy.