The VAT system is based on the same basic principles in all EU Member States. The purpose of VAT is to tax consumption by consumers. The business is the party that collects the tax from the consumer and remits it. In principle, therefore, VAT is owed in the EU Member State where the consumer uses the goods.
Every business must deal with VAT to some degree. Businesses remit part of the turnover from each sale to the tax authorities in the form of VAT.
In the past, consumers did most of their shopping locally. In today’s digitised society, however, consumers increasingly shop online. As a result, consumers will often purchase a product from a business established in another Member State. This imposes an obligation on the business to ascertain the country in which VAT must be remitted.
In addition, imports by consumers of products from third countries (countries outside of the EU) are sharply increasing, and more and more digital services are being provided to consumers in other Member States.
The current VAT rules for e-commerce are complicated and no longer in line with our increasingly digitised society or the blurring borders in the retail environment. That is why the VAT rules are being amended effective 1 July 2021. The amendments only pertain to sales to consumers (B2C). The rules for B2B sales will remain in force.
The most important amendments are:
Click for more information on these subjects or download our whitepaper here.
For other questions about e-commerce, you can always contact our office at +3120 760 4500.