All you need to know about VAT in E-Commerce from 1 July 2021
As of July 1, 2021, E-Commerce to private individuals will be taxed in the consumer state. The VAT incurred can be reported and paid uniformly for all EU member states.
Intra-Community E-Commerce refers to deliveries of goods from one Member State to private individuals and so-called “threshold purchasers” in another Member State. Until now, there were different delivery thresholds for intra-Community E-Commerce in each member state. Only when the respective delivery threshold was exceeded the delivery was taxable in the country of destination instead of the country of origin. As of July 1, 2021, the delivery thresholds will be abolished and mail order sales in the EU will therefore be taxable in the country of destination from the first cent onwards. This is intended to ensure – in line with the basic idea of the VAT Directive in the EU – taxation in the country of consumption.
The declaration and payment of VAT for mail order sales can be carried out via a portal for all EU member states, so that in principle registration in the respective member state is no longer necessary, although the previously known procedure can be retained. This so-called EU-One-Stop-Shop (EU-OSS) leads to the fact that Austrian entrepreneurs can submit the corresponding returns via FinanzOnline for all EU member states and the payments for all member states can be made to the Austrian tax authorities. Details can be found in this article.
Taxation in the country of destination means in particular that the applicable tax rate in the country of destination must be known before delivery and invoicing. A guideline can be found on the EU Commission’s website at https://ec.europa.eu/taxation_customs/tedb/vatSearchForm.html . However, this cannot replace clarification with local tax advisors or local tax authorities.
We recommend adapting your internal systems. Entrepreneurs must issue invoices for intra-Community mail order transactions, whereby the relief of the respective country for small value invoices is not applicable.
Input taxes for services declared and paid via an OSS may still have to be claimed in the assessment procedure in the respective member state or refund procedure (in Austria via FinanzOnline).
A warehouse in the consumer state can be an obstacle to the envisaged easing of compliance obligations! If goods are transferred to a warehouse in another Member State, this constitutes an intra-Community transfer for own purposes, which results in a (usually taxable) intra-Community acquisition in the Member State of the warehouse. If the goods are removed from the warehouse and sent to an end customer within the same Member State, a local delivery must be declared, which cannot be reported and paid via the EU-OSS. Therefore, a VAT registration in the respective country is still necessary for such cases.
The only exception to the new mail order regulation is for so-called microentrepreneurs, whose mail order deliveries continue to be subject to VAT in the country of origin.
Microentrepreneurs are entrepreneurs
- who operate their business exclusively in one Member State and do not have a permanent establishment in another Member State,
- who supply goods to other Member States (with the exception of excisable goods such as alcohol), and
- whose total amount of remuneration for these supplies and electronically rendered services did not exceed EUR 10,000 either in the previous year or in the current year.
However, microentrepreneurs have an option and may waive the application of the exemption. The waiver must be declared to the tax office within the deadline for submitting the advance return for the advance return period in which E-Commerce was effected for the first time.
If you have questions regarding the corrent VAT changes, please contact our tax experts!