From July 1, 2021, the value-added tax (VAT) rules on business-to-consumer e-commerce are changing. The general principle of taxing VAT in the Member State of consumption and the fight against VAT fraud are strengthened.
What changes on July 1st for online businesses?
The changes affect all online sales of goods from countries outside the European Union, as well as intra-European sales. The current VAT regime is simplified. A single threshold of €10,000 is now applicable. Beyond that, VAT is declared and paid in the Member State of consumption.
A one-stop VAT shop
As of July 1st, the collection of VAT is made more reliable. Online sales platforms become, in certain cases, liable for VAT and must apply new record-keeping obligations. The scope of the one-stop VAT shops, set up in each EU Member State, is extended. This is to simplify the procedures for businesses, including platforms, and avoid them having to register in each member state of consumption to pay VAT.
From July 1, companies registered with the French counter are no longer required to register with the tax authorities of other Member States to declare and pay VAT.
Fight against parcel splitting to avoid VAT
In addition, still from July 1, distance sales of goods located outside the EU for less than € 22 are no longer exempt from VAT, except in the overseas departments and regions (DROM).
This is to fight against the splitting of parcels to escape VAT. These sales are now all taxable to VAT. This can be collected by the seller or the platform from the buyer at the time of the online sale thanks to the Import one-stop shop (IOSS) when they do not exceed 150 euros.
Beyond that, VAT will have to be declared to customs electronically and these formalities will be carried out by the carriers acting on behalf of the online buyers.
– A dedicated teleprocedure is available on the impots.gouv.fr website from the professional tax area of operators to carry out these procedures.
– If you have any questions about the registration procedures for the new system, you can email: [email protected].
What changes for individuals?
For individuals who buy on sites that sell all taxes included (TTC), nothing changes.
The individuals who buy on sites which sell without tax and do not apply the VAT at the time of the online sale, will be able to be claimed by the carrier, at the time of the delivery of their parcel, the payment of the rights and taxes, in particular the VAT.
The carrier may also charge the consumer a handling fee in addition to the VAT. To avoid any additional costs at the time of delivery, it is therefore important to check, at the time of the online purchase, that the price displayed by the online seller includes VAT.
Online trade and VAT fraud
Online sales reached €112 billion in France in 2020, an increase of 8.5% compared to 2019.
Tax and customs rules must therefore evolve to guarantee the conditions of fair competition between all European and foreign players in online commerce, as well as between those in e-commerce and physical retail.
In fact, until now, European Union (EU) merchants and e-traders have been suffering from unfair competition from certain online vendors based outside the EU. They were taking advantage of obsolete mechanisms to avoid paying VAT.
More than €5 billion of VAT could be collected in the EU on these transactions that were previously untaxed (source: European Commission).
