New tax obligations for online traders will apply from 1 July 2021. Originally scheduled for 1 January 2021, the e-commerce tax package adopted by the EU in 2017 will now come into force in the summer. The new laws pay particular attention to the revised delivery thresholds - in general, many things will change for online retailers. We reveal the details.
The most interesting change from the e-commerce tax package concerns the so-called VAT delivery thresholds. These are thresholds that are set differently depending on the EU member state, which lead to a trader being liable for VAT as soon as he exceeds them. As a result, the trader must apply for a VAT ID in the respective country in which he has exceeded the threshold and in future must submit tax returns and advance returns here and also fulfil other tax obligations.
An online trader is liable to pay VAT if his annual net turnover exceeds the delivery threshold, which is generated from the sale of goods from country A to country B. Currently, the supply thresholds of the EU member states are generally between 35,000 EUR and 100,000 EUR. However, this will change in the future.
The delivery thresholds relate to cross-border trade and therefore only become relevant when sales to other EU countries begin and higher turnover is already achieved there. Because: As long as you do not exceed the delivery thresholds with your sales to other EU countries, you pay tax on your sales as usual in Germany. Only when you exceed the delivery threshold do you pay taxes in the respective EU country.
Example: You are trader A based in Germany. Now you start to sell your products to France as well. The delivery threshold in France is 35,000 EUR. If you have generated less than 35,000 EUR by the end of the year through sales to customers in France, you simply pay tax on these sales in Germany. However, if you realise that you will reach or even exceed 35,000 EUR by the end of the year, you have to pay tax on these sales in France. In order to do this, you have to register for VAT in France.
Currently, each EU member state can set its delivery threshold individually. In order to simplify the supply threshold issue, the EU has agreed to set a uniform delivery threshold that applies to the whole of Europe with effect from July 2021. This new delivery threshold is 10,000 EUR and does not apply individually for each EU country, but for all of them together.
Means: As soon as your turnover with sales to the EU exceeds 10,000 EUR net per year, you have to register for VAT in every EU member state to which you sell goods. From this point on, you no longer pay tax on the goods in the country from which you send them, but in the country to which you sell them.
Sales from Germany to Germany, for example, are excluded. The regulation only applies to cross-border sales.
The new regulation was adopted in 2017 and was originally supposed to come into force on 1st January, 2021. However, this date was postponed due to the global pandemic, so that the new delivery threshold regulation is now scheduled to come into force on 1st July, 2021.
The delivery threshold is not the only reason for registering for VAT abroad. Another reason that obliges you to register for a VAT identification number in another EU country is the storage of goods. If you, as a German trader, store your goods in France, for example, you must also register for VAT in France.
This applies, for example, to Amazon merchants who use an FBA service and store goods in Amazon's warehouses for this purpose. If they do this, they must register for VAT wherever goods are stored by them. In addition to registration, this also entails other tax obligations such as tax assessment notices, advance returns, etc.
As with many other reforms, the reason for the change in the delivery threshold regulation lies in tax losses of the individual EU member states. Due to certain tax regulations and other regulations that did not exist but should have, there were VAT losses of several billion euros annually. With the reform, this should no longer happen in the future.
Moreover, in historical retrospect, e-commerce is still a very new industry that is growing all the faster for it. Here it was time to adapt to this growth and define new regulations to meet both the needs of the state and the needs of traders.
The e-commerce tax package does not only contain changes to cross-border trade, but also provides for changes in the following areas:
We will analyse these changes in more detail in the following paragraphs.
The introduction of the Europe-wide delivery threshold will mean that online traders will have to register for VAT significantly earlier and in significantly more countries. The MOSS procedure was introduced to simplify this process.
Those who opt for this procedure do not have to register in each Member State, but can manage the VAT incurred from one point of contact, such as the German Federal Central Tax Office. Those who choose not to do so must register in all EU countries to which they sell and fulfil the VAT tasks and obligations there.
Goods from third countries with a value of less than 22 EUR are currently exempt from import VAT. However, this regulation will be abolished as of 1st July, 2021.
The abolition of the tax exemption is intended to compensate for a competitive disadvantage of EU companies.
They are already a common part of most e-commerce packages in recent years: changes to the liability of marketplace operators, such as Amazon or eBay. In this specific case, this means that sales exceeding a value of goods of 150 EUR made to end consumers will fall under the responsibility of the online platform operators with regard to the payment of VAT.
For traders, this probably means that the platforms will pay closer attention to the fact that they are registered correctly for VAT purposes and must provide evidence of this.
The new e-commerce tax package brings quite positive changes for online traders and simplifies the handling of tax. Although in theory they now have to register more quickly in more EU member states, the new MOSS regulation actually simplifies things. This is how traders can benefit from the new regulation.
We recommend that online traders follow the events surrounding the new package closely in order to take the right measures for it in good time. Since the regulations have already been postponed for half a year because of COVID-19, this may well happen again, especially since the world is not yet back to normal. It is simply important to observe when the regulations will actually come into force and to prepare accordingly. In this way, the new tax package can simplify one or two tax matters for traders.