Recently the European Council adopted new rules making it easier for online businesses to comply with VAT obligations and now the Eurozone is ready to put in act what the Commission approved. Part of the EU’s ‘digital single market’ strategy, the proposals are aimed at facilitating the collection of VAT when consumers buy goods and services online.
The new legislation includes the abolishment of the import VAT exemption for low value consignments, the introduction of a single point of registration to report and remit VAT. Online platforms and online marketplaces are introduced as persons that become liable for remitting VAT on goods sold on such platforms by third-party vendors, instead of the vendors themselves.
On 30 September 2020, the European Commission published Explanatory Notes on the new VAT e-commerce rules. The paper contains extensive explanations and clarifications on these new rules including practical examples on how to apply the rules if you are a supplier or an electronic interface (e.g. marketplace, platform) involved in e-commerce transactions. These explanatory notes are meant to help online businesses and in particular SMEs to understand their VAT obligations arising from cross-border supplies to consumers in the EU.
As written in the notes, the “European Commission aims at simplifying VAT obligations for companies carrying out cross-border sales of goods or services (mainly online) to final consumers and to ensure that VAT on such supplies is paid correctly to the Member State in which the supply takes place, in line with the principle of taxation in the Member State of destination”.
By the way, as underlined by European Commission, due to “the practical difficulties created by the measures taken to contain the coronavirus pandemic, the application of the new VAT e-commerce rules is postponed by six months. Thus, the rules will apply as of 1 July 2021 instead of 1 January 2021, giving Member States and businesses additional time to prepare”.
What about European cross-border logistic network? Buying shoes in Italy, books in England and art in France with the click of a mouse – one of the great accomplishments of the internet – is how easy international E-Commerce is making it for customers to find and buy things at any time and from almost any market. In 2019, more than half of European E-Commerce sales are generated in the UK, France, and Germany alone, three markets that are in focus for many brands and retailers that sell their goods in Europe. In all of Western Europe, approximately 26 % of the total E-Commerce sales are already cross-border orders.
The pandemic has resulted in a strong increase in demand for e-commerce since lockdown measures have led consumers to seek more online options and amid challenges, freight transport in Europe is running with almost no delay. The demand for urban logistics space throughout Europe is growing, as there is an increasing number of e-commerce orders. It’s forecasted the parcel volume in Europe will be increased with 69% by 2021, according to the Urban Logistics report by Cushman & Wakefield. And online retailers want to please customers with last mile deliveries, so more warehouses in and around cities are needed.