Forthcoming changes to EU e-commerce rules – yes they do apply to the UK
One thing that is however certain is that forthcoming changes to the EU rules on B2C e-commerce will apply to the UK even though they come into force after the end of the transitional period which ends in December. The changes were supposed to come into effect on 1 January 2021, but their introduction has now been put back to 1 July as a result of the COVID-19 pandemic.
One Stop Shop
The first and probably most significant change is the introduction of the One Stop Shop (OSS). At present, where a company sells on a B2C basis, Distance Selling rules apply. These state that such sales are treated as domestic sales until a sales threshold is passed, at which point it must register for VAT in the EU country where its customer belongs.
So, a UK company selling to a customer in France would charge UK VAT, but when the total value of its sales to customers in France exceeded the French Distance Selling threshold it would have had to register for French VAT. A company could, therefore, have an obligation to be registered for VAT in each Member State of the EU.
The Distance Selling thresholds are either €35,000 or €100,000, with most countries opting for the lower threshold.
In 2015 a Mini One-Stop Shop (MOSS) was brought in for B2C sales of digital, telecoms and broadcast services (streaming media, e-books, apps etc). This is now being extended to all sales of goods from one country to customers across the EU whereby a seller can opt to submit a single EU VAT return from 1 July 2021 through OSS covering all their sales instead of having to have multiple VAT registrations.
The return will be submitted on a quarterly basis to their home countries tax authority listing out sales by EU country, the VAT % used and the VAT due; they then pay this VAT to their domestic tax authority, who act as a clearing house and remit the VAT to the other EU Member States.
It remains to be seen whether UK companies will be able to submit OSS returns through HMRC as part of our future relationship with the EU, but if we crash out without a deal, or this is not agreed with the EU as part of our future relationship, then UK companies wanting to use the OSS would need to register for it in an EU Member State of their choice.
Sellers holding stock in warehouses in other EU Member States will still have to remain foreign VAT registered including those using the Fulfilment By Amazon (FBA) program.
For non-EU businesses, it is also intended that the OSS will be available for all supplies of services to private individuals in the EU, but again final details will be dependent upon the terms of any agreement regarding our future relationship with the EU.
Low Value Consignment Relief
There is currently a €22 VAT exemption on small parcels being imported into the EU. This will be withdrawn from 1 July 2021. As the UK will be outside the EU a UK Seller will have to charge VAT (at the rate appropriate to the customer’s home country) at the time of sale on all consignments up to €150.
This VAT can be declared and paid via a new submission the Import One Stop Shop (IOSS): this will create a quicker customs clearance.
Non-EU sellers will have to register for IOSS in just one EU Member State to declare the VAT on any affected imports up to €150.
For imported goods above this limit they will need to have a normal VAT registration in an EU country if they wish to declare and recover the import VAT. If a seller chooses not to use IOSS then their customer will either have to pay the import VAT before they can have their parcels, and the process will take longer as IOSS acts as a fast track way of getting the goods through customs.
Marketplaces become the deemed seller and collect VAT
Marketplaces which facilitate cross-border sales to consumers will become the deemed supplier, so they will be required to purchase the goods from the seller, and then make the sale to the consumer. They would then charge and report VAT in their own name.
This marketplace VAT liability does not extend to product liability. The EU has defined facilitating as 'electronic platforms assisting sellers and consumers to come together and strike a contract for the supply of goods on a cross-border basis'.
This new deemed supplier provision will apply where a marketplace is facilitating B2C sale for imports not exceeding €150 where, instead of import VAT, the marketplace charges the customer either VAT at the point of sale, distance selling cross-border, or domestic transactions of any value for a non-EU seller, so whilst these provisions will apply to us the exact form will depend on the outcome of the negotiations regarding our future relationship with the EU.
There is scope for the marketplace to opt out of these provisions and transfer their obligation to the company responsible for delivery of the goods.
It can be seen that the exact final shape of how some of these changes will apply remains to be seen, but they will apply in one form or another.
If you should have any questions, please contact Phil Salmon, VAT Partner, or your usual haysmacintyre contact.