October 1, 2020
European Commission publishes Explanatory Notes on new VAT e-commerce rules
The European Commission (Commission) has published Explanatory Notes on the new value-added tax (VAT) e-commerce rules. They Explanatory Notes (EN) contain extensive explanations and clarifications on these new rules including practical examples on how to apply the rules for suppliers or electronic interfaces (e.g., marketplaces and platforms) involved in e-commerce transactions. These EN are meant to help online businesses and in particular small and medium-sized enterprises (SMEs) to understand their VAT obligations arising from cross-border supplies to consumers in the European Union (EU).
Due to the practical difficulties created by the measures taken to contain the coronavirus pandemic (COVID-19), application of the new VAT e-commerce rules has been postponed by six months. Thus, the rules will apply as of 1 July 2021 instead of 1 January 2021, as originally planned, giving Member States and businesses additional time to prepare.
The Commission aims at simplifying VAT obligations for companies carrying out cross-border sales of goods or services (mainly online) to final consumers and to ensure that VAT on such supplies is paid correctly to the Member State in which the supply takes place, in line with the principle of taxation in the Member State of destination.
The Commission proposed EU legislation in this area in two stages. The first measures entered into force in 2015 and covered telecommunications, broadcasting and electronic services to consumers. The second stage of measures was adopted by the Council in December 2017 and extended the simplification to distance sales of goods as well as to any type of cross-border service supplied to final customers taking place in the EU. The latter measures, also referred to as "the VAT e-commerce package" are set to apply from 1 July 2021.
Implementation of the VAT e-commerce package has been gradual and in 2021 the extension of the Mini One Stop Shop (MOSS) and the special provisions concerning the obligations of electronic interfaces will enter into force:
The Commission press release is available here.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Belastingadviseurs LLP, Amsterdam
Ernst & Young LLP (United Kingdom), London
PDF version of this Tax Alert