Second stage of the VAT digital package

Mail order companies and service providers will have to prepare for various changes in the sales taxation of cross-border trade as of July 1, 2021.

In addition to many other changes in tax law, the Annual Tax Act 2020 also implemented the second stage of the EU's VAT digital package, which provides for changes in VAT regulations for cross-border trade in goods and services. In the case of mail-order business within Germany or in non-EU countries, as well as for supplies and services to other entrepreneurs in Germany and abroad, nothing changes as a result of the new regulations.

The situation is different, however, for cross-border supplies and services to non-entrepreneurs, i.e. in particular consumers: The country of destination principle, according to which a supply or service is subject to VAT in the EU state in which the end consumer is based, will be further upgraded by the second stage of the digital package. In particular, the following new regulations will apply from July 1, 2021:

• Mail order: The determination of the place of delivery in the mail order regulation will be fundamentally changed as of July 1, 2021. Instead of the previous mail order regulation, there is now a distance selling regulation. In this context, the place of supply of an intra-Community distance sale will shift to the place where the goods are located when the transport or dispatch to the purchaser is completed.

• One-Stop-Shop: The existing "mini-one-stop store", which was previously only intended for electronic services to non-entrepreneurs in other EU countries, will be expanded to become a "one-stop store" (OSS). The scope of the OSS will include all cross-border services and mail order sales within the EU to a consumer or other non-entrepreneur as of July 1, 2021. Via this OSS (and the IOSS for importers set up in parallel), traders and service providers will be able to declare and pay the VAT due in the other EU states for services that fall within the scope of the special regulations centrally via the Federal Central Tax Office (BZSt).

  

• Registration: Since April 1, 2021, entrepreneurs can apply electronically to the BZSt for participation in the OSS and IOSS with effect from July 1, 2021. Although later registration is possible, it applies exclusively to taxation periods after registration. Those who already use the mini-one-stop store do not have to register again.

• De minimis limit: An entrepreneur who is domiciled in only one EU state and whose sales of electronic services and distance sales (mail order) to non-entrepreneurs in other EU states did not exceed EUR 10,000 in the previous calendar year and are not expected to exceed this amount in the current year can also treat the corresponding sales as sales to consumers in Germany and calculate and pay VAT according to the domestic rules. This uniform de minimis threshold replaces the previous delivery thresholds of the individual EU member states, which, if exceeded, required registration for VAT purposes and taxation of the delivery in the respective EU state. However, this de minimis rule is not mandatory, because participation in the OSS is open to any entrepreneur with corresponding sales. For this purpose, the waiver of the de minimis rule must be declared to the tax office for at least two years.

• Online marketplaces: For certain deliveries of goods via an online platform, from July 1, 2021 the platform operator will become liable for the VAT incurred, as the supply chain "entrepreneur to platform operator and then platform operator to end consumer" will be fictitious. This regulation replaces the previous liability regulation for deliveries of goods via an online marketplace to non-entrepreneurs by an entrepreneur not established in the EU, where the transport begins and ends in the EU. If, on the other hand, the delivering entrepreneur is located in the EU territory, no delivery between the platform operator and the non-entrepreneur is fictitious. Those who use "Fulfillment by Amazon" or comparable offers from other service providers are usually also informed by the service provider about the upcoming changes.

• Imports from third countries: The exemption limit of 22 euros for import VAT will be abolished with effect from July 1, 2021. At the same time, the "Import-One-Stop-Shop" (IOSS) will be introduced for mail-order sales of items with a value of up to 150 euros from a non-EU country. Shipments for which VAT has been declared and paid via the IOSS should then pass through customs control much more smoothly. In cases where the IOSS is not used, the import VAT can continue to be paid by the post office or parcel service and collected from the recipient.

Much more detailed information on the OSS and the IOSS, as well as a question-and-answer catalog, is provided by the BZSt on its website in the "Value added tax" section an. In addition, you are welcome to contact us if you are unsure about the application of the new regulations or have further questions.