New VAT rules for merchants in the EU

Merchants in the EU who sell their products or services in other EU member states will have new VAT rules to follow from 1 July 2021. The move is set to help merchants by ensuring that they do not have to register for VAT in other member states other than their own, for products or services below the required threshold. The change is also related to the additional voluntary registration by merchants at a One-Stop Shop (OSS).  

According to the EU website, the EU OSS is an electronic portal which simplifies up to 95% of VAT obligations for online sellers and electronic interfaces throughout the EU. So, how will it do this

Firstly, it will enable merchants to register for VAT electronically in a single member state for all intra-EU distance sales of goods and for business-to-consumer supplies of services.

Secondly, merchants will be able to declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return.

And finally, it will enable merchants to work with the tax administration of their own country and in their own language, despite sales being cross-border.

There are several categories of merchants that the OSS will apply to:

As a starting point, it is a taxable individual established in the EU (who is not a deemed supplier) for supplies of B2C services taking place in a EU member state in which he is not established or distance sales of goods within the EU.

Next, it applies to any taxable person not established in the EU for distance sales of goods within the EU.

Lastly, it applies to an electronic interface (this can be established either in the EU or outside the EU) facilitating supplies of goods (deemed a supplier) for distance sales of goods within the EU or certain domestic supplies of goods.

Wondering how to access the OSS? Luckily, the process has been made quite easy as each EU country will have an online OSS portal where businesses can register. The starting registration date is from 1 April 2021 and the OSS can be used for transactions made on or after 1 July 2021

What else does this change mean? At present, the rules and regulations for cross-border trade within the EU state that businesses that sell goods within the EU above a certain threshold (35,000 EUR or 100,000 EUR, depending on the member state) to buyers located in another EU country need to register and pay VAT in the buyer’s country.

However, from 1 July 2021 onward, this rule will be abolished and replaced with a new EU-wide threshold of 10,000 EUR. If your trade volumes fall below this new threshold, you will be able to continue applying the domestic rules for VAT on your cross-border sales. If your sales fall above this threshold, you will be liable for VAT in the buyer’s member state.

Regarding electronic interfaces (which are considered a marketplace, a platform or other related entity), merchants will have to, from 1 July 2021, register on the OSS. This applies to distance sales of goods by a non-EU seller to a EU buyer. In this scenario, the electronic interface is considered to be the seller and is liable for the VAT payment of VAT.

Meanwhile, a non-Union OSS is also available for online sellers not established in the EU and all B2C service supplies in the EU made by such non-EU online sellers.

And if you’re a myPOS merchant, you can sell cross-border and accept payments within the EU as all our POS devices come equipped with a free DATA card with 3G/4G connectivity and we offer a multi-currency mode to help you accept seamless payments with instant settlement of funds.

For more detailed information about this development, please visit the EU website by clicking here. 

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.