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EU proposes e-commerce platforms liable for VAT fraud


EU proposes e-commerce platforms liable for VAT fraud

The EU is progressing with proposals to impose liabilities on online marketplaces for VAT fraud committed by non-EU merchants on their e-commerce platforms.  The move will attempt to tackle over €5bn in non/under declared VAT by fraudsters, many originating from China.  The UK introduced the same measure in 2016 to tackle its own estimated £1.5bn fraud losses.

The EU plan also involves making 3rd party warehouses and fulfilment centers liable if they have not acted in good faith in determining if their non-EU merchant customers are fully EU VAT compliant.  As a tax measure, the proposal would require unanimity from all 28 EU member states.  However, only a small handful of states - including Poland, Croatia, Finland and Slovenia - have raised any major concerns about surrendering such fiscal autonomy to the EU level.

EU plans follow UK’s anti-VAT fraud measures

The UK has already imposed potential VAT liabilities on the marketplaces if they do not act to block manifestly VAT fraudulent non-EU traders.  An HMRC compulsory fulfilment house register and due diligence regime is also planned for 2019.  VAT fraud in the UK has been estimated to be as high as £1.5billion per annum.

Withdrawing abused low-value import VAT relief

Separately, the EU has already proposed that the current low-value consignment relief threshold be removed. This enables merchants to import goods from China or anywhere else outside of the EU without paying VAT or customs.  Many fraudulent traders have deliberately under declared the value of their goods to benefit from the tax-free benefit. The threshold in the UK is £15 per parcel, and the average across the rest of the EU is €22.

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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 this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.