On July 1, 2021, the EU implemented new e-commerce VAT rules, which comprehensively reformed the VAT rules of the B2C e-commerce market in the 27 EU member states, with four major changes:
1. Introducing the OSS system
The European Commission said that it would further supervise through the OSS (One-Stop-Shop) system. The system is a one-stop service platform for VAT, and its core is an expansion based on the MOSS VAT in 2015. The original MOSS was only for telecommunications, broadcasting and electronic services, but now the remote sales of physical products are included in the supervision scope.
From July 1, 2021, B2C sellers shipping from EU countries no longer need to register VAT numbers for other EU countries and complete multiple VAT declarations in their countries. Operators or platforms outside the EU can also simplify the process of VAT declaration for B2C orders of small goods with a declared value of less than 150 euros by registering for the VAT One-Stop Service Platform (OSS).
Second, abolish the threshold for remote sales
Cancel the “remote sales threshold” and set a universal threshold of 10,000 euros in the EU to simplify the VAT obligations of micro-enterprises.
When the annual sales of remote sales in any EU country exceeds 10,000 euros, it is necessary to follow the VAT rate of each destination country in the EU. When the annual sales exceed 10,000 euros, the OSS system must be used to make a unified declaration according to the VAT rate of that country.
Third, cancel the 22 euro import tax exemption policy
From July 1, 2021, the current 22 euro small goods tax exemption system will be abolished, and an “import plan” will be created to require EU and non-EU sellers to collect VAT at the place of sale for goods with a value of no more than 150 euros.
Sellers can use the OSS system to declare and pay the VAT, allowing them to clear customs quickly and conveniently. These products are exempt from VAT when imported, so they can be quickly released by customs.
If the OSS system is not used, another way is to have the customs declarant (postal operator, courier company, customs agent) collect import VAT from consumers, and these VATs are paid to the customs on a monthly basis.
Fourth, clarify the responsibility of e-commerce platforms to collect VAT
In order to further clarify the VAT tax obligations of e-commerce platforms, the new rules stipulate that e-commerce platforms can be regarded as brokers, and their specific sales behaviors are regarded as purchasing goods from sellers and subsequently reselling them to consumers. E-commerce platforms need to bear VAT tax obligations and declare and pay VAT in the final country of sale.
It is recommended that cross-border e-commerce companies conducting EU business strengthen communication with sellers, clarify the distribution of compliance obligations between them and sellers, and obtain necessary transaction data in a timely manner to accurately calculate the VAT that needs to be paid. At the same time, to improve the level of information management, it is necessary to accurately verify the integrity and authenticity of the information provided by the seller, and to adapt to the new requirements for document collection and preservation, invoice issuance, etc. brought about by policy changes. Cross-border e-commerce companies can consider whether to use the OSS system based on their actual situation to reduce the compliance burden.