During the old normal, we were already steadily moving towards more and more online shopping, but the year 2020 has rapidly boosted online sales even more. Not only are we increasingly purchasing directly from manufacturers spread across the world, but we are also making many of these purchases via relatively new market players known as platforms. This means that consumers can now choose from a far greater range of products and suppliers and that suppliers and manufacturers can reach a far greater target group through this e-commerce market. This new reality has given rise to new challenges, not only in the area of logistics but also in the area of taxes.
In the past, consumers would walk to the corner shop and could only buy what the shopkeeper had to offer, but with the world in our back pocket we can now easily buy from suppliers spread across the entire world. Every retailer in obliged to pay over part of their sales turnover to the tax authorities in the form of VAT. In the old situation, sellers easily knew which tax authority they had to pay that VAT to because they were physically selling from and in the Netherlands. In the online world, sellers are quickly faced with tax obligations abroad, because one of the basic principles of VAT is that the tax is due in the country where consumption takes place. Sellers must therefore pay VAT in the country where the product is used, which is why VAT is generally charged in the country of destination for products or in the country where the consumer resides for services. New rules will apply as from 1 July 2021 for the purpose of simplifying such VAT payments to the various EU Member States. You can find a short list of the impending changes below, but VanLoman is of course more than willing to further guide you through these rules.
Threshold amounts will no longer apply to distance sales
As from 1 July 2021, Dutch suppliers selling to private customers outside of the Netherlands will virtually always have to charge and pay VAT in the other EU Member State. Under the current rules, rather generous threshold amounts still ensure that VAT registrations and reporting foreign VAT is necessary only when the threshold amounts are exceeded. While a threshold amount will remain in place, it will be lowered to just EUR 10,000 – substantially lower than the current threshold amounts that still vary from one EU Member State to the other. This threshold amount will apply to all distance sales of goods and sales of digital services to consumers. If your total amount of sales in individual EU Member States stays below EUR 10,000 each year, your Dutch online store can continue to charge Dutch VAT assuming that the transport supply starts in the Netherlands and that you are established (primarily of through a fixed establishment) in an EU Member State.
If your sales exceed the threshold amount of EUR 10,000, you must charge the VAT applicable in the EU Member State where your customer resides and file a local VAT return in the country in question (using a local VAT registration) or through use of a simplified VAT return.
VAT exemption for imports of consignments of limited value (EUR 22) abolished
Consignments worth up to EUR 22 are currently exempt from import VAT when imported into the EU. This exemption will no longer be in place, meaning VAT must be charged for all supplies – including those from outside of the EU – to the private customer in the country of arrival of the goods. However, imports worth up to EUR 150 will remain exempt from customs duties.
Platforms that play an “active role” will become liable for the payment of VAT
In principle, every seller is responsible to account for and pay the VAT on their own respective sales.. However, under the new VAT rules, platforms can also become liable for this payment of VAT if they play an active role in the conclusion of the sale. An active role involves more than just digitally matching supply and demand. A platform playing an active role supports the purchase and supply of products to private customers and therefore owes VAT in the country where the customer resides. In addition:
- Suppliers supply goods to consumers in the EU through the platform.
- The value of the goods does not exceed EUR 150.
- The goods are imported into the EU.
If the value of the consignment exceeds EUR 150, the platform will also owe VAT if it facilitates the supplies made to a consumer by a company established outside the EU and the goods travel from one EU Member State to a consumer in another Member State.
Based on these new liability rules it is not only important for suppliers to verify their obligations but increasingly so it is also important for platforms to check their exact role in the sales process. This is determined in large part by the general terms and conditions and the “customer journey”. Naturally, VanLoman will gladly bring you up to speed on this and help you determine your exact obligations.
Simplified VAT return
The new VAT rules for e-commerce will also introduce a simplified VAT return, which will ensure that not every delivery abroad will immediately require a foreign VAT registration. Such a system already exists for digital services: the Mini One Stop Shop, or MOSS scheme. This scheme will be expanded and renamed to One Stop Shop (OSS) following the legislative change. If both types of supplies – digital services and goods – exceed the threshold amount of EUR 10,000, you can file your return using this portal.
Thus, starting 1 July 2021, companies can report any VAT owed in other EU Member States for supplies of services or supplies of goods to the tax authorities using the OSS portal. In that case, you will not need a VAT registration in other EU Member States. The Dutch Tax Authorities will then ensure that the VAT amounts reported through the OSS portal are sent to the correct EU Member State. Please note that you may only use the Dutch OSS for sales from the Netherlands, excluding any stocks / warehouses kept outside of the Netherlands. Deliveries from such locations will likely still trigger a local VAT registration.