Goods inside of the EU sent to a consumer within the EU
As of 1 July 2021, changes will occur in the European Union (EU), for businesses that sell goods to consumers. If your stock is kept within the EU and you sell these goods to consumers within the EU, then these changes are of relevance to you. Beware! The country where your business is established is irrelevant for these rules. The rules apply to businesses established in the EU, but also to businesses established in a non-EU country.
In the below, we discuss the VAT consequences in cases where you are a supplier selling goods directly to the consumer. However, if you (also) sell goods to consumers through a platform (marketplace), other consequences will follow.
What is relevant for you, in your role as supplier?
New threshold for small businesses
The current thresholds for distance sales will no longer apply. In principle, sales to consumers are always subject to VAT in the EU country of arrival of the goods. An exception is made for so-called small businesses. If a business is only established in one EU country, and it does not have an annual turnover of more than € 10,000 from distance sales and digital services provided to B2C customers in other EU countries, that business must charge the VAT of the country in which the transport of the goods initiates assuming this is the EU country of establishment. This scheme is optional. Small businesses may alternatively choose not to use this threshold, but to apply the normal rules.
- Beware! The threshold of € 10,000 only applies to businesses established in an EU country. The threshold does not apply to businesses established in a non-EU country.
Example
You are established in the Netherlands and you operate an online shop. You primarily sell to consumers in the Netherlands. Additionally, your sales to consumers in other EU countries amounts to around € 8,000 per year. You do not exceed the threshold of € 10,000 per year. You choose to apply the threshold, and therefore you charge Dutch VAT on all your sales to consumers.
Threshold not applicable to you
If your sales to consumers in the EU exceed € 10,000 per year or if you choose not to apply the threshold, then VAT is due in the EU country of destination of the goods. What does this mean for you? If you sell goods to consumers in other EU countries and ship the goods to these consumers, you must charge the local VAT of the EU country of destination.
Example
You are established in France. You sell goods through your online shop, to consumers in all EU countries. Your annual turnover is € 75,000. Your sales are liable to VAT in the EU country of destination of the goods. If you sell and ship goods to consumers in Spain, you therefore charge Spanish VAT to these consumers. If you sell and ship goods to consumers in Germany, you therefore charge German VAT to these consumers.
Special scheme for payment of VAT: OSS
To prevent administrative burdens such as local VAT registrations and local VAT returns, a simplification will be implemented: the so-called One Stop Shop (OSS) return. If you are a supplier, you need to specifically register for this scheme. Make sure to register on time, ideally before you initiate your activities. If your registration for the OSS return is too late, this will lead to additional obligations in the other countries where you owe VAT.
If you are established in an EU country, you should register for the OSS return in that EU country. If you are established in a non-EU country, you must register in the EU country in which the dispatch or transport of the goods begins. In the situation that the dispatch or transport of the goods begins in multiple EU countries, you can choose its EU country of identification.
As soon as you are registered for OSS, you must report all VAT due with regard to sales to consumers, in the OSS return. Additionally, you must pay the VAT due, to the authorities of the EU country of the OSS registration. The EU country of registration subsequently passes the VAT due, on to the authorities in the other EU countries. For completeness’ sake please note that B2C supplies of goods that do not involve a cross border shipment within the EU, cannot be reported via the OSS and remain to be reported via a local VAT return.
Making use of the OSS remains optional. You may also choose not to make use of the OSS, and instead to register for VAT in the relevant EU countries, to pay VAT there and to file local VAT returns. A local registration may for example be appealing if you incur significant costs with local VAT, or if you have other VAT obligations in that particular country, for example if you also keep local stock there.
Example
You are established in Australia and you keep stock with a logistics service provider in the Netherlands. You sell goods through your online shop, to consumers in the Netherlands, Portugal, Greece, Spain and Italy. Your total turnover from all these sales is € 1,200,000 per year. You will be liable for Dutch, Portuguese, Greek, Spanish and Italian VAT on these sales. You have registered for OSS plus you have registered for VAT in the Netherlands. In your Dutch OSS return, you report the Portuguese, Greek, Spanish and Italian VAT due. You pay this VAT to the Dutch Tax Authorities. The Dutch Tax Authorities then pay the relevant VAT amounts to the tax authorities in Portugal, Greece, Spain and Italy. In your Dutch VAT return you report the Dutch VAT due on these sale to the Dutch customers. This Dutch VAT is paid to the Dutch tax authorities as well.
Who can use the OSS?
- Businesses established in the EU
- Businesses established in a non-EU country
- Platforms (marketplaces), established in the EU, which facilitate the above mentioned sales to consumers
- Platforms (market places), established in a non-EU country, which facilitate the above mentioned sales to consumers
The OSS return - how does it work?
OSS returns must be filed electronically, every calendar quarter, in the EU country in which you are registered for OSS. The deadline for filing OSS returns and paying the VAT due, is the last day of the month following the reporting period.
Invoicing
If you choose to use the OSS, there is in principle no obligation to issue an invoice for the sales to the consumers. However, if you do choose to issue an invoice, the invoicing rules of the country of identification apply.
If you choose not to make use of the OSS, then you are obliged to issue invoices.
What will you have to do, in your role as supplier?
- Analyse your flow of goods
- Determine the VAT consequences
- Determine which scheme you want to use, and whether you can do so
- Do you want to use OSS? If so, register for OSS
- Adjust your website and underlying systems and make sure you charge the VAT of the EU country of destination
- Prepare your OSS VAT returns, file them on time and pay the VAT due, on time, to the authorities of the EU country of registration
- Do you not wish to make use of OSS, or did you not register for OSS on time?
Contact your advisor. Additional VAT obligations will apply to you.
These new e-commerce rules will definitely work to your advantage and help you increase your market share in the EU. It is however important to start preparing on time. Several matters need to be adjusted, both internally and externally.
How can I help?
Do you sell goods inside of the EU to consumers within the EU, and do you have any questions? Please feel free to reach out to me.
