E-commerce: simplification in VAT legislation as of 1 January 2019

In previous newsflashes, we informed you on various upcoming legislative changes concerning the VAT taxation of e-commerce activities. In this newsflash, we briefly discuss the first tranche of legislative changes, which will enter into effect as per 1 January 2019.

VAT threshold for small ‘TBE-services’ entrepreneurs

Under current VAT legislation, telecommunications, broadcasting and electronic services (hereinafter: ‘TBE-services’) provided to consumers are subject to VAT in the country where the consumer is residing. This rule is administratively burdensome for small entrepreneurs, as they must keep track of the place of residence of their customers. For this reason, as from 1 January 2019 onwards, small entrepreneurs can apply the VAT rate of their country of establishment to their TBE-services – assuming their yearly cross-border turnover remains below a threshold of 10,000. Specific conditions apply for this simplification.

Simplification of proof of the place of residence

Entrepreneurs who provide B2C (Business-to-Consumer) TBE-services are currently required to obtain two separate, non-contradictory items of proof to establish the place of residence of their customers. This rule has also proven to be administratively cumbersome. For this reason, entrepreneurs providing TBE-services who remain below a yearly turnover threshold of 100,000 are allowed, under certain conditions and as of 1 January 2019, to rely on only one item of proof obtained from a third party.

Expansion of the MOSS scheme

Under the Mini One-Stop-Shop scheme (MOSS), certain categories of entrepreneurs who provide TBE-services may report and pay VAT in only one Member State, including the VAT due on TBE-services which are carried out and taxed in other Member States. The MOSS scheme is expanded as of 1 January 2019: entrepreneurs who are established outside the EU but who already have a VAT registration in one of the Member States can also make use of the scheme.

Simplification of invoice rules

In the context of B2C TBE-services, entrepreneurs are required to issue invoices in compliance with the invoice requirements applicable in the Member State where the customer (consumer) is residing. To take away this administrative complexity, entrepreneurs who provide B2C TBE-services and who also make use of the MOSS scheme are allowed, as of 1 January 2019, to apply the invoice rules as applicable in the Member State in which they are identified for the MOSS scheme.

The above changes in VAT legislation concerning e-commerce primarily involve administrative simplifications for e-commerce entrepreneurs. We therefore welcome the new rules. Finally, we note that the above is based on the Dutch implementation of EU law; other Member States may have adopted rules with a different purport.