New sales tax rules for online retailers

The EU's economics and finance ministers have agreed on new sales tax requirements for online retailers that are to come into force by 2021.

Just one year after the EU Commission presented its proposals for reforming the EU VAT system, the EU's economics and finance ministers have agreed on a series of measures to simplify the VAT system for online businesses in the EU. At the same time, the EU states also expect the changes to generate up to EUR 5 billion in additional VAT revenue per year. The new rules will come into force gradually until 2021. The following measures are envisaged:

• Small business: To make it easier for startups and small businesses to access the single market, simplification of the VAT rules is planned. For micro-enterprises, VAT on cross-border sales of less than €10,000 a year will be governed by the rules of the country in which the companies are based. Simpler procedures will apply to cross-border sales worth up to €100,000 a year. The measures will come into force on January 1, 2019.

  

• Central point of contact: All businesses selling goods online to their customers can meet their VAT obligations via a single user-friendly online portal in their national language. Without the portal, VAT registration would be required in every EU member state in which the business wants to sell. This is precisely what businesses cite as one of the biggest obstacles to cross-border trade. The one-stop shop for online sales of goods is expected to be operational in 2021, giving member states time to update the IT systems on which the system is based.

• Online platforms: Large online marketplaces are given responsibility for ensuring that VAT is paid when businesses in non-EU countries sell goods to consumers in the EU. This includes sales of goods already stored by non-EU companies in warehouses within the EU, which often serve the purpose of selling goods VAT-free to consumers in the EU.

• Small shipments: The exemption from import VAT for small consignments is to be abolished. Trusted traders outside the EU will then have to register with the one-stop shop and collect VAT from their customers in the EU at the time of sale. These goods will then benefit from an accelerated customs procedure, as shipments worth up to EUR 150 will no longer be stopped at customs clearance. This should eliminate disadvantages for suppliers within the EU, who must generally charge VAT, while suppliers from third countries can sell goods to consumers free of VAT. This change will also remove the basis for tax evasion, where a value of less than EUR 22 is declared for high-value imported goods in order to claim exemption from VAT.