The abolition of the distance sales thresholds

The current threshold for distance sales applies per individual EU country. Member States are free to determine the threshold amount for their country. That is why the threshold varies from EUR 35,000 to EUR 100,000.

If the threshold applicable in a EU Member State is exceeded in a given calendar year, the business is obliged to register for VAT purposes and pay VAT in that country. Businesses currently are not obliged to apply the thresholds for each individual Member State and can always decide to remit and pay VAT in the country where the goods are received by the consumer/the country of use.

Because of the different thresholds for distance sales, businesses need to monitor whether the threshold is exceeded in each EU Member State to determine whether VAT registration and payment are required. This involves a high administrative burden. In addition, businesses are often too late in discovering that the threshold has been exceeded, as a result of which they are unable to comply with their VAT obligations in good time.

Effective 1 July 2021, the distance sales threshold per EU Member State will be abolished and replaced by a single threshold of EUR 10,000 for the delivery of goods and digital services. The new threshold of EUR 10,000 means that truly small enterprises are not directly affected by the rules for e-commerce.

Because the threshold is being abolished, a business will always have to remit VAT in the country where the consumer uses the goods. To prevent businesses from having to register for VAT purposes in multiple EU Member States, it will be possible to submit a One Stop Shop (OSS) VAT return.

Find out more about the One Stop Shop here One Stop Shop return or download our whitepaper here.

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