In 2021 the European Union (EU) rules for cross-border online sales are about to change. Due to IT problems and the COVID-19 pandemic the intended changes have been postponed from 1 January 2021 to 1 July 2021. As a result, companies and tax administrations have more time to prepare for the new legislation. The new rules will apply to almost all companies that sell products online.

Package of measures

The package of VAT measures includes multiple changes that we have divided into four main parts. The previous article serves as an introduction and background on the whole package of measures. In this article the practical consequences of the One-Stop-Shop for distance sales of goods and services by companies established in the EU will be explained.

Abolishment of thresholds for distance sales of goods

Distance sales are sales of products to consumers in which these products are shipped from one EU-country to another EU-country and whereby the supplier is involved in the transport of the products.

Currently the cross-border sale of goods is VAT taxable in the EU-country of dispatch of the goods. Only if a certain turnover threshold in the country of destination is exceeded, you will have to register for VAT purposes in that country, submit VAT returns and pay VAT in that country. That turnover threshold is approximately 35.000 euro in most countries, but for The Netherlands, Germany and Luxemburg the threshold is 100.000 euro. This scheme is complicated for many companies and will therefore be abolished.

Instead of the different thresholds per destination country, there will be a single turnover threshold for all distance sales to another EU country. If you sell for no more than 10.000 euro (goods and services together!) to all other EU countries together, you may continue to charge and pay the VAT in the country of dispatch. If you exceed this threshold, you will now have to pay VAT in the destination countries.

One-Stop-Shop in country of establishment for online sales

To prevent companies from having to register for VAT and pay VAT over distance sales in all EU-countries, the One-Stop-Shop scheme will be extended. This scheme already exists for certain electronic services (Mini-One-Stop-Shop). The scheme is extended for most services and thus also for the supply of goods through distance sales. You can register for One-Stop-Shop at the tax authorities of your companies’ country of establishment. One-Stop-Shop is not mandatory, but offers many benefits:

  • You only need to register with the tax authorities in your country of establishment and not in all countries to which you sell.
  • You only have to submit 4 VAT returns per year for all your European sales instead of sometimes hundreds of VAT returns now.
  • You can transfer the total VAT amount due in all EU-countries with one payment (bank transfer) instead of hundreds of payments to tax authorities in various countries now.
  • Using One-Stop-Shop, it is no longer mandatory to issue an invoice to consumers and meet the different invoice requirements in all EU-countries.
  • An incomplete declaration in One-Stop-Shop may be corrected in the next declaration, no supplementary or correctional VAT returns will have to be filed.

If your company is already registered for VAT purposes in several countries, these registrations can be cancelled by participating in One-Stop-Shop.

Convenient rules for services as well

Does your company provide certain (online) services to consumers? Even then it is possible that you have VAT registrations in different countries to be able to pay the VAT on these services to the correct tax authorities. These are certain consumer services for which VAT must be paid in the country where the service is being provided. In addition to the distance sales, the One-Stop-Shop will be extended to include more services as of 1 July 2020 as well and will henceforth be called OSS.

Do you have any questions?

OSS has a lot of benefits, but cannot be used in all cases. Our international VAT advisers have extensive experience in online sales and are ready to work together and review if your company can benefit from these new schemes. If you have any questions, please do not hesitate to contact your VAT consultant.

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