Article -
European Commission proposes new VAT rules to support e-commerce and online
businesses in the EU

On
1 December 2016, the European Commission has published proposals to improve the
Value Added Tax (VAT) environment for e-commerce businesses in the EU.
Particularly, the proposed changes, aiming to allow start-ups and SMEs, to buy
and sell goods and services more easily online.

Specifically,
the proposal refers to:

1. The introduction of a single portal ('One Stop
   Shop') through which businesses could account for VAT due on supplies of goods
   and services in other Member States aiming at the reduction of the VAT
   compliance expenses of the e-commerce businesses they currently encounter;
2. The removal of the import VAT exemption of €22 for
   small value consignments entering EU from outside the EU aiming to provide a
   level playing field to EU businesses;
3. >An annual threshold of €10,000 below which
   businesses selling cross-border could continue to treat sales as though they
   were domestic, aiming to minimise burdens attached to cross-border e-commerce
   arising from different VAT regimes;
4. An annual threshold of €100,000 below which
   businesses selling cross-border will benefit from simpler procedures for
   identifying where their customers are based;
5. The option allowing Member States to align VAT
   rates on electronic and printed publications aiming to correct the less
   favourable VAT treatment of e-publications compared to printed publications.

Subject
to agreement by the Member States, the proposed reforms could start as early as
2018.

A. New
rules - expected to be introduced in 2018

 A1. New VAT Rules for sales of services
electronically

Currently, businesses selling cross-border electronic services have to register
in ALL the Member States to which their customers are based, no
threshold exists.

With
the proposed action, businesses selling cross-border electronic services
without exceeding a threshold of €10.000 per annum can opt to apply the rules of their home country. This rule simplifies the VAT treatment for a large number of small businesses which can remain out
of the Mini One Stop Shop (MOSS) regime, this way.

Moreover,
this would result to the use of familiar domestic VAT rules regarding the
invoicing requirements and record keeping rather than the ones applicable in
the Member State of the customer, as it currently applies.

Also,
small businesses will no longer be audited by each Member State where they have
sales, but by the tax administration where the business is located.

Another
simplification for SMEs selling online services, is the fact that if their yearly
turnover remains below €100.000, these companies will only have to collect one
proof of evidence to prove their customer's location. Currently, they are
required to collect two pieces of evidence.

A2. Equal vat
rate for e-books,
e-newspapers and their printed equivalents

Currently,
Member States are allowed to tax printed publications such as books and
newspapers at reduced or in some cases zero rates, whereas their electronic
equivalents, e-publications, are subject to standard rate.

The
Commission proposes to grant all EU Member States the possibility to apply the
same VAT rates to e-publications as they currently apply to their printed
equivalents (possibly reduced rates).

B.
New rules - expected to be introduced in 2021

B1. New VAT Rules for
sales of goods electronically

The
simplification rules described above for the sale of electronic services are
expected to be extended to the online sale of goods by 2021.

B2.
VAT One Stop Shop portal

Currently,
online traders engaged in the distance selling of goods are obliged to register
for VAT in the EU Member State of their non-business customers.

As
of 2021, the one stop shop, (similar to the MOSS, currently available for the
sale of services electronically) is expected to be extended to the online sale
of goods (distance sales).

This
will be a significant simplification for online traders engaged in the distance
selling of goods, since they will be able to handle the VAT obligations across
the several member states via the use of an online portal, the "One Stop
Shop” by submitting only one simple quarterly return. Consequently, such a
reform will significantly reduce the vat compliance cost online traders
currently encounter.

B3. Abolition of thresholds for imports

Currently,
import into the EU of packages with value less than €22 per consignment is
exempt from VAT. This exemption is expected to be abolished as of 2021.

Disclaimer

This
publication has been prepared as a general guide and for information purposes
only. It is not a substitution for professional advice. One must not rely on it
without receiving independent advice based on the particular facts of his/her
own case.  No responsibility can be accepted by the authors or the publishers
for any loss occasioned by acting or refraining from acting on the basis of
this publication.

February 2017

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