EU 2021 ecommerce VAT package – doubts ahead
- Oct 23, 2020 | Richard Asquith
The EU’s e-commerce package will simplify pan-EU VAT compliance for online distance sellers and make marketplaces liable for the VAT on many transactions of their third-party merchants. It will launch on 1 July 2021. However, a number of questions remain outstanding:
- A number of countries – notably the Netherlands and Germany – are struggling to have their IT platforms ready for the new shared single EU OSS VAT return. They have asked for a second delay to the reforms, but have been turned down. There needs to be more clarity on the readiness of the 27 member states’ systems to help businesses prepare.
- Few of the 27 EU member states have issued details of the OSS or IOSS VAT return formats or upload schema's. This means businesses cannot start to plan the IT and business process changes needed to start reporting. These details, along with registration application processes should be forthcoming.
- The import IOSS VAT return ‘Green Lane’ still has open questions on its workings. As it is a voluntary option for marketplaces and sellers, these need to be resolved to boost confidence and adoption of this important efficiency measure.
- Customs checks processes are not clear on ≤€150 consignments that have already been taxed in the checkout by sellers or deemed supplier marketpalces. The concerns are that lack of proper checks on IOSS numbers could result in double taxation at the border. Refunds on these will be burdensome and may undermine acceptance.
- Member states implementation of the European Commission new rules is already showing inconsistencies. France is making marketplaces liable for all import VAT - no €150 cap. Germany is retaining its domestic VAT registration obligation.
- Member states will have the right to impose standard VAT rates on all IOSS imports to reduce their own burden to verify reduced VAT rate transactions. This creates further complexity for businesses to track, and ensure they do not lose out on over taxation.
- The member states accept that they wish to tighten the rules further in the 2022 Tax Package VAT measures. This would:
- Extend the IOSS return to all imports, not just ≤€150, to stop deliberate under valuation
- Extend the OSS VAT return to all B2C-related transactions – so sellers holding stocks in other EU member states and thus eliminate the need for direct foreign VAT registrations