New VAT rules for e-commerce have come into force in the European Union, from July 1, 2021.

Everyone in the e-commerce supply chain is affected, from online sellers and marketplaces/platforms both inside and outside the EU, to postal operators and couriers, customs and tax administrations, right through to consumers.

Here are the main points:

  • All goods imported in the EU are now subject to VAT – even the ones of a value up to €22 (that were previously exempted from VAT). This measure is expected to add an estimated 7 billion euros a year to EU treasuries.
  • E-commerce sellers will need to have a VAT registration to each member state in which their turnover is above €10,000. The €10,000 threshold is already applicable for electronic services sold online since 2019.
  • Online sellers may now register for an electronic portal called the One Stop Shop (OSS) in their own member state and in their own language and take care of all of their VAT obligations. Once registered, the online retailer can notify and pay VAT in the One Stop Shop for all of their EU sales via a quarterly declaration.
  • The Import One Stop Shop (IOSS) allows non-EU sellers to register for VAT in the EU, and will ensure that the correct amount of VAT makes its way to the member state in which it is finally due. For consumers, this means no more calls from customs or courier services asking for an extra payment when the goods arrive in your home country, because the VAT has already been paid.
  • Simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 are established, in case the IOSS is not used.

Introducing the new VAT rules, the EU has two main goals. Firstly, address unfair competition for EU businesses and secondly increase public revenues by fighting VAT avoidance and fraud.