The new EU VAT rules for e-commerce will come into effect on July 1. These rules mainly apply to webshops with an annual turnover of more than € 10,000 to consumers in other EU countries. So, it’s rather important information for when you send parcels internationally. Because from July 1, as a webshop, you must calculate the VAT in the customer’s country. In this article, we provide information about the consequences and tips on how to prepare for the new VAT rules.
Declare VAT yourself in each country
The biggest difference with the current situation in the field of international e-commerce, is that the new VAT rules in the EU will come into effect on July 1 with only one turnover threshold. All webshops with an annual turnover of € 10,000 or more from sales to private individuals in EU countries outside of domestic market must calculate the VAT of the customer’s country from July 1 of this year. You have two choices here: file a separate VAT return in each country or make use of the One-Stop-Shop or OSS. At the moment you can still include turnover from EU countries with an annual turnover of less than € 35,000 in the local VAT return. But that will no longer be possible from July 1.
New VAT rules in the EU
If you already file the VAT return separately every quarter in the countries to which your products are shipped with a turnover of € 10,000 or more, nothing will change in those countries. But if that is not yet the case for your e-commerce business because the turnover is lower, you must request a VAT number in the countries to which you ship. Or you can register for the OSS within the new one-stop-shop system of the Tax Authorities. You then file the VAT return on all your sales to private individuals in other EU countries in one report per quarter. So also for countries where you already filed the VAT return locally. The tax authorities in your local country then ensure that the VAT is reported and paid in the other EU countries.
Do you have an online store? Do you supply goods through dropshipping? Do you sell goods or services to customers, who do not file VAT returns in other European Union Member States? There will be new VAT rules for e-commerce.
Continue to declare yourself per country or via OSS?
Are you unsure about what to do? That makes sense, because it’s not an easy decision: to file the VAT return or use the OSS for your webshop(s). If you have already arranged the separate VAT returns properly, you can consider continuing to do this and requesting a VAT number for the other countries as well. And if you expand with, for example, a Spanish webshop, you also have to request a Spanish VAT number. This is useful if you incur costs in Spain, because with this number you can immediately settle the VAT as input tax in the Spanish VAT return. That isn’t possible if you opt for the One-Stop-Shop.
On the other hand, the OSS scheme is worth considering. Because if your turnover is low in certain EU countries, sometimes the costs of filing a VAT return in those countries may not outweigh the benefits. Then you can choose to no longer deliver to these countries. Another option is to switch to the OSS. Then you only have to submit the VAT return for all your sales in one report per quarter. The VAT return for the countries with low turnover is then a small effort.
Keep in mind that the service level of the One-Stop-Shop system is still limited until the spring of 2023. This can lead to longer lead times. System-to-system declarations are also not yet possible until spring 2023. After that, the One-Stop-Shop system is fully automated. Do you opt for the OSS? Then it is important that you de-register the current international VAT numbers. Unless you need it for other activities for which you are liable for VAT.
So what to do now?
It’s understandable that you want to sort things out so that you can make an informed decision. Our e-commerce experts can help with this. It is also good to know that if you now opt for continuing to declare the VAT yourself in each country, you can still switch to the OSS in the future. For example if you have opened that Spanish webshop.
And where can I find information about the IOSS?
As of today, e-commerce sellers, re-sellers or marketplaces can appoint B2C Europe as their IOSS agent and we will take care of the rest. Read more information about the IOSS here.
Or contact us to talk about how we can unburden you when shipping parcels from your webshop internationally.