30th November 2016
The European Commission is proposing to simplify rules for e-commerce across EU country borders by introducing a one-stop shop for online VAT payments that will cover goods as well as services, in a move which it says will cut compliance costs by 95%
It says introducing an EU wide portal for online VAT payments will save businesses across the EU €2.3bn a year. The new rules will also ensure that VAT is paid in the member state of the final consumer, leading to a fairer distribution of tax revenues amongst EU countries.
The Commission says the proposals will help member states to recoup the current estimated €5bn of lost VAT on online sales every year.
In addition, the Commission is revising regulations so that member states can, if they choose, apply the same VAT rate to e-publications such as e-books and online newspapers as they do for their printed equivalents.
Pierre Moscovici, commissioner for economic affairs, taxation and the customs union, said: ‘Online businesses operating in the EU have been asking us to make their lives simpler. Today we’re doing that. Companies big and small that sell abroad online will now deal with VAT in the same way as they would for sales in their own countries. That means less time wasted, less red tape and fewer costs.
‘We’re also simplifying rules for micro-businesses and startups, allowing them to tap new markets more easily’.
Currently, online traders have to register for VAT in all the member states to which they sell goods, which the Commission estimates costs businesses around €8,000 for every EU country into which they sell.
Under the new proposals, businesses will make one quarterly return for the VAT due across the whole of the EU, using the online VAT one stop shop.
A new yearly threshold of €10,000 in online sales will be introduced under which businesses selling cross-border can continue to apply the VAT rules they are used to in their home country. The Commission says this will make complying with VAT rules easier for 430,000 companies across the EU, representing 97% of all micro-business trading cross‑border.
There will be a second new yearly threshold of €100,000 for SMEs when it comes to VAT, with simplified rules for identifying where their customers are based.
Other simplifications would allow the smallest businesses to benefit from the same familiar VAT rules of their home country, such as invoicing requirements and record keeping. The first point of contact will always be with the tax administration where the business is located and businesses will no longer be audited by each member state where they have sales.
The exemption from VAT for small consignments imported into the EU that are worth less than €22 is to be removed, on the grounds it is creating opportunities for fraud and tax abuse.
Andrus Ansip, Commission vice president for the digital single market, said: ‘Our VAT rules were set up before the boom of the internet and online sales.They are complex. They vary between EU countries. They bring extra cost to businesses trying to trade in different national markets. They need updating.
‘Today’s proposals are designed to support the digital economy and to accelerate growth for cross-border online businesses.’
These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.
Digital Single Market – Modernising VAT for cross border e-Commerce is here.