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Modernising VAT: Cross-Border E-Commerce

The 1st July 2021 became the starting date for the adjustments coming in for the EU’s scheme for Modernising VAT for Cross-Border E-Commerce.

Designed to simplify VAT responsibilities for agencies making cross-border resources, the adjustments, were suppose to begin on the 1st January 2021.

However, the idea became postponed due to COVID-19 to allow Member States and agencies the extra time they required.

From 1st July-

The VAT exemption for items in minor consignments with a value of up to EUR 22 has been removed; low value consignment relief has been abolished.

All imports into the EU will be subject to VAT at the applicable local rate unless they come within import relief schemes.

The Import One Stop Shop (IOSS) scheme, which is voluntary, begins.

This is a simplification available to enterprises not based in the EU who supply goods to EU consumers that are not VAT registered and have a consignment value of less than €150.

When items are sold online, the marketplace is responsible for registering for local VAT through their own one-stop shop.

Imported goods that are VAT-accounted for benefit from a VAT exemption, enabling for speedier customs clearance.

Modernising VAT

Alternative Routes

Please keep in mind that, as previously stated, the IOSS method is merely a convenience. There are two alternatives for sales outside of the scheme:

  1. If the customer is the importer of record,
  2. If the supplier is the importer of record.

The Union OSS Scheme, which was previously known as MOSS, has been expanded to include all B2C services.

Who it will affect

This policy will not affect all UK enterprises, but it will affect supplies of items from Northern Ireland stock that are covered by the Northern Ireland Protocol.

Only EU and NI founded enterprises are subject to a pan-European VAT threshold of £8,818, below which the supply is deemed as liable to VAT in the MS of supply. However, when the supplies above that threshold, local VAT must be accounted for.

When an NI business registers for the OSS, sales above that threshold to other member states are declared through a One Stop Shop (OSS) return.

The previous requirement was to register for VAT in each member state where the distance sales threshold was reached.

The Non-Union OSS Scheme has been expanded to include all B2C services where the point of supply is in the EU.

This simplification eliminates the requirement to register for VAT in each member state.

Benefits

It also allows a Non-Union OSS registration to be used to account for VAT on supply like those listed below:

1- Accommodation services provided by taxable individuals who are not established

2- Entrance to cultural, artistic, sports, scientific, educational, entertainment, or other comparable activities

3- Transportation services

4- Valuation and repair services for mobile tangible goods,

5- Ancillary transportation activities such as loading, unloading, handling, or similar activities,

6- Services related to immovable property,

7- Hiring of modes of transportation,

8- Provision of restaurant and catering services for consumption on board ships, planes, or trains, and so on.

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