VATLive > Blog > Europe > EU 2021 Closing the delivery VAT avoidance loophole

EU 2021 closing the delivery VAT avoidance loophole

  • Jul 6, 2020 | Richard Asquith

As part of the 1st July 2021 EU Ecommerce Package, EU member states have agreed to close a delivery loophole being exploited by some ecommerce sellers to avoid charging and reporting foreign VAT on distance selling. 

A limited number of sellers are not directly providing delivery to the foreign consumer; instead organising a third-party fulfilment firm for the customer to sign a separate delivery contract. This potentially means the seller could just charge their national VAT rate instead of that of the customer’s country of residence - as per the EU's distance selling obligations of charging the VAT of consumer's country of residency.

To ensure that the tax authorities of the customer will be getting their fair share of VAT, the EU is closing this avoidance loophole from 1 July 2021. 

On 1 July 2021, the 27 member states of the European Union (EU) will introduce sweeping reforms to the VAT obligations for B2C e-commerce sellers and marketplaces. This includes major changes:

  1. Launching the One-Stop-Shop EU VAT return
  2. Ending low-value import VAT exemption and new IOSS return; and
  3. Making marketplaces deemed supplier VAT.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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