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Introduction of the VAT E-Commerce package: Postponement of entry into force, now 1 July 2021

The European Union Council confirms the postponement of the introduction of e-commerce VAT reform, this reform was adopted on 5 December, 2017 under Directive 2017/2455 as well as that of 21 November 2019 relating to distance sales and certain domestic deliveries of goods.

What are the measures covered by this new VAT reform?

The reform plans a redefinition of the VAT regime for intra-community distance sales of goods (B2C), as well as the establishment of a one-stop shop to centralize the declarations and collection of the VAT in the different Members States delivered. The turnover threshold per Member State, from which sales will become taxable in the destination country and must be reported via the one-stop shop, is lowered from € 35,000 or € 100,000 to € 10,000.

There will be also an implementation of an Import One Stop Shop, under which import VAT will be exempt and output VAT due on distance sales paid. In addition, the VAT exemption on the importation of goods with a value of less than € 22 is abandoned in order not to distort the market.

Marketplaces will, under certain conditions, be liable for VAT on distance sales of imported goods of less than 150 euros.

Ultimately, the main goal of this VAT package is to simplify the formalities falling on businesses, to better combat fraud and to guarantee fair competition between EU and non-EU businesses. This reform is therefore awaited by operators with a non-dissimulated impatience.

Why postponing the VAT e-commerce package?

The new VAT system also known as the « VAT e-commerce package” was to enter into force as of 1 January 2021 in all EU Member States.

However, due to the crisis linked to the COVID-19 pandemic, the Member States encountered difficulties in transposing these measures into their national law. This is why the European Commission proposed on 8 May 2020 a postponement of the entry into force of the new VAT reform on 1 July, 2021. 

This postponement should be formally adopted by the Council of the European Union without too much difficulty. Operators must therefore continue to observe the current territoriality and liquidation rules for VAT in Europe.

Dear distance sellers, EUROTAX is accompanying you before and after 1 July, 2021. 

Please do not hesitate to contact us for more information.

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