From July 2021, marketplaces may become the deemed supplier when they facilitate certain cross-border B2C transactions of their third-party sellers.They will therefore be liable to collect, report and remit the VAT due from the consumer. Whilst the marketplace takes on the VAT rights and obligations of the sale, they do not take on other obligations, such as product liabilities. This new rule comes into force as part of the e-commerce package of reforms to help simplify VAT compliance and tackle online VAT fraud. Note: there is an opt out for this obligations under the Special Arrangements, moving the VAT collections role to postal services and customs agents instead.
This is one of three reforms as part of the July 2021 EU e-commerce VAT package. The other two reforms are:
- Launching the One-Stop-Shop EU VAT return; and
- Ending low-value import VAT exemption and new IOSS return.
The 2021 EU VAT e-commerce package was delayed, including this reform, until 1 July 2021. In addition, the UK marketplace VAT liabilities has already implemented marketplace obligations from 1 January 2021 - the end of the UK's Brexit transition period.
To understand where the new rules will apply, the following facts should be examined: defining a marketplace; is there facilitation; and which transactions are in scope. Once a deemed supply has been identified, a new two-stage VAT transaction process must be applied.