One of the biggest shifts the pandemic left behind has been the change in how consumers shop and spend. The surge in online buying has pushed many companies to digitalize their sales channels with ecommerce.
For that reason, the goal is to simplify online selling between businesses and consumers for online retailers. The new VAT regulation comes into force on 1 July 2021.
What prompted this change?
First, the complicated handling of VAT on sales of goods and services to private customers within the EU, since above certain thresholds the tax is due in the country of destination. This means the seller has to self-assess VAT wherever the buyer is located.
On the other hand, imports under €22 were exempt from VAT, which created price competition within the EU for goods imported from countries outside the EU.
What are the main changes?
1. A one-stop shop is set up for sellers, allowing them to declare in Spain the VAT accrued in other Member States. The one-stop shop is a portal where VAT is declared and paid electronically. Each company must register with the system and file its VAT return on a quarterly basis.
2. A common sales threshold of €10,000 is unified, meaning any company that sells goods or provides services above this amount within the EU will now be taxed in the country of destination. If it does not exceed €10,000, it will be taxed in the country of destination.
3. The VAT exemption on imports under €22 from non-EU countries is removed, and taxes must now be paid in the country of origin. That said, a simplified procedure is introduced for distance sales of imported goods in consignments of €150 or less.
In short, this is a new change that will simplify the management of accrued VAT for every ecommerce business across the Member States. As a result, all filings and tax obligations will be centralized.
At StockAgile we see this as an opportunity, and that is why we are focused on a world of digital disruption.