VAT Changes for B2C Trade in the EU after July 1, 2021

VAT rules in the European Union will change after July 1, 2021, with the rollout of the new EU VAT package. The new rules will affect B2C transactions and will impact sellers, marketplaces, and postal couriers. 

Currently, sellers who have customers in multiple countries in the EU have the obligation to complete multiple VAT registrations and charge and remit VAT in each country. If they’re providing broadcast, telecom or digital services, they also have the option to use the MOSS scheme (MOSS is short for Mini-One-Stop-Shop), and register in a single country. Currently, goods imported from outside of the EU that have a value of less than €22 are VAT-exempt. 

The new VAT scheme coming in effect on July 1, 2021, is an extension of the MOSS scheme for B2C sellers, and aims to simplify tax compliance, prevent tax fraud, and improve the conditions for fair competition in the EU. 

What’s New Under the New EU VAT Package?

Beginning July 1, 2021, the OSS (One-Stop-Shop) VAT scheme will be rolled out. In it, B2C suppliers of products or services will be able to register for VAT and file a single VAT return in one of the EU member states for the totality of their EU transactions. The OSS scheme will not be obligatory and sellers might still decide to file VAT reports in multiple countries. 

In addition to that, a €10,000 threshold for all EU sales will be introduced and distance selling threshold rules will be abolished. Under €10,000, B2C sellers will need to apply the VAT rules of the member state from which goods are dispatched. Above that limit, they’ll need to use the VAT rules and rates of the destination country. 

Products of a value of less than €22 will no longer be VAT-free when imported from outside of the European Union. A simplified import scheme, IOSS (Import-One-Stop-Shop) will cover all imported goods of a value lower than €150, and logistics and courier firms will be able to file a monthly report of their VAT obligations. 

In addition to that, online marketplaces that facilitate B2C transactions with EU consumers will be responsible for collecting and remitting VAT. 

Who’s Affected by the New VAT Rules? 

The new rules will impact marketplaces, sellers, and postal couriers who operate in the EU and deliver goods and services to EU customers. 

Goods Suppliers 

B2C suppliers of goods will have a threshold of €10,000 for sales in the whole EU, after which they’ll have to apply the VAT rules of the destination member state, where consumers are located. Besides that, the rules differ based on the seller’s location:

EU sellers who sell goods from a single country, will be able to complete their VAT returns under the OSS system every quarter. They’ll have to do this in addition to their regular VAT return.

Sellers who are located outside of the EU (including UK suppliers), will have the possibility to complete their EU VAT registration and file VAT returns in a single country, under the OSS scheme. They’ll be able to pick the country where they want to register as a non-EU taxpayer, unless they’ve already established themselves in one of the EU member states. They’ll still have to file standard VAT returns in a single member state. Goods whose value is less than €22 will not be exempt from VAT. 

Service Providers

B2C service providers will have the possibility to register for VAT in a single country, under the OSS scheme. The country in which they’ll register will depend on their location and on whether they’re already registered and established in the EU. 

Online Marketplaces

Online marketplaces that facilitate the sale of goods to end consumers in the EU will be liable for VAT:

For goods of a value of less than €150 imported from outside of the EU

For goods of any value located in the EU and sold by sellers located outside of the EU 

They’ll also have the obligation to keep detailed records of all of their transactions with EU residents. 

Couriers 

For goods of €150 or less, postal couriers will have the possibility to use a simplified H7 dataset. They’ll also be able to file monthly declarations and pay VAT on the part of their customers.