VAT in e-commerce : EU tax obligations of sellers and digital platforms
VAT compliance in e-commerce is of big importance, as online sales of goods and services continue to gain ground within the European Union.
The e-commerce market is currently shared between the direct e-sellers, the intermediaries and the facilitating platforms (Amazon, Shine, etc.).
These e-commerce players are subject to different EU VAT obligations depending on their status, their contractual relationship, the annual amount of sales, the type of buyers and the country of destination of goods and services.
VAT in e-commerce : local sales
The VAT rules for the direct e-sales made within a single EU member state are quite easy to comply with. Such sales are generally subject to the local VAT (except for small businesses exemption scheme), and the applicable VAT rate depends on the category of the concerned goods and services.
The scenario becomes more complicated in the presence of an intermediary that can be considered as transparent intermediary (acting in the name and on behalf of the principal seller) or as reseller (acting in its own name).
In the first case, the intermediary applies VAT only on the margin which constitutes its turnover. In the second case, it is the total amount of the consideration received from the final buyer that is subject to VAT and taken into account for the calculation of the direct tax.
The distinction between the both types of intermediaries is made on the basis of the signed contracts, the purchase orders, the sales invoices or, failing that, any other factual element proving the nature of the relationship between the stakeholders. It is therefore very important to choose your intermediary’s model in advance and to ensure its correct implementation in order to comply with the related tax obligations and to avoid any tax reassessment. The digital platforms can also be considered as transparent intermediaries (sales facilitators) or as resellers. Acting as resellers, the digital platforms are responsible for VAT obligations on sales towards final buyers. Otherwise, these obligations fall on e-commerce sellers.
The same intermediary principles apply to cross-border sales.
In some cases, digital platforms are automatically considered as presumed resellers, in particular for the facilitation of distance sales of imported goods with an intrinsic value of less than €150 (IOSS counter) and for the facilitation of distance sales of goods within the EU (local and cross-border sales) on behalf of non-EU sellers (OSS counter).
VAT in e-commerce : cross-border sales of goods
Cross-border sales of goods and services can expose the (re)seller to VAT obligations abroad. This particularly concerns the sale of goods from one country to another one.
Among the cross-border sales within the European Union, we distinguish the intra-community deliveries and the distance sales of goods.
If made towards VAT-registered customers (B2B sales), the intra-community deliveries of goods are exempt from VAT in the country of departure, but subject to VAT in the country of arrival. The VAT is due by the foreign tax payer and can be reverse-charged (under certain conditions) in the destination country.
In case of non-taxable buyers, we speak of B2C distance sales which are taxable in the seller’s country up to an annual threshold of €10,000 for cross-border sales of goods and services. When exceeding this threshold, the e-sellers are required to apply the VAT of the country of destination of the goods after prior VAT registration. However, there is a simplification allowing the e-sellers to avoid the VAT registration in foreign Member States by registering in the European OSS counter in their country of establishment (for non-EU sellers : in the Member State of their permanent establishment or in the Member State of goods’ departure). After the OSS registration, the e-sellers can apply on their cross-border sales the VAT of the country of destination without being registered there. The foreign VAT collected in this way is paid by the seller to the OSS counter which distributes the due VAT amounts to the Member States concerned.
Being applicable only to cross-border sales, the OSS counter does not cover sales of goods made from stock located in a foreign Member State to buyers residing in the same Member State (except for sales facilitated by platforms as presumed resellers). These local sales require the seller to be VAT registered in the country where the stock is located and to file periodic VAT returns in that country.
The cross-border sales made from foreign stock to other Member States can be declared through the OSS counter in the seller’s country. However, the seller will still need a VAT number in the country of stock’s location for filing Intrastat declarations (according to the annual thresholds) for cross-border goods’ arrivals and dispatches within the EU from and to the stock. In addition, the filing of the EC sales list can be required in case of intra-Community deliveries of goods from foreign stock to VAT-registered buyers established in other Member States.
It is possible to avoid the aforementioned VAT obligations in the country of stock’s location in the presence of a local reseller managing the call-off stock. Under the call-off stock regime introduced though the VAT quick-fixes in 2020, the sale from foreign stock to the local reseller is not considered as a local sale subject to foreign VAT, but as an intra-community delivery of goods exempt from VAT in the country of departure and presumed as occurring at the time when goods are called-off from stock by the reseller. Acting as a presumed reseller, the digital platform is liable for the VAT obligations applicable to local and cross-border sales from stock to final buyers, both individuals and businesses.
Subject to several conditions, the call-off stock model has been used since several years by different digital platforms for reducing the VAT burdens of e-sellers. Intended to be abolished in frame of the European VAT reform in the digital age (VIDA), the call-off stock simplification will be replaced by the OSS counter which will cover both the cross-border movement of stocks within the EU and local e-sales within a single EU member state.
In anticipation of these changes, some digital platforms are gradually ending the practice of call-off stock and the management of VAT compliance on behalf of e-sellers. This is immediately exposing the e-sellers to new VAT obligations in foreign countries:
- VAT registration in the member state of stock’s location
- Filing of VAT returns for local sales in the foreign Member state
- Filing of Intrastat declarations for arrivals and dispatches of goods from the foreign stock
- Filing of EC sales lists for B2B deliveries of goods from the foreign stock
VAT in e-commerce : cross-border sales of electronic services
VAT on sales of electronic services towards foreign VAT registered buyers is due by the recipient of the services in its country of establishment.
Electronic services intended for individuals resident within the EU are taxable in the seller’s country up to an annual threshold of €10,000 for online sales of goods and e-services.
Beyond this threshold, the distance sales are subject to the VAT in the destination country and require the VAT registration of the seller in that country. However, European and non-European sellers can opt for the OSS counter (European and non-European regimes respectively) for avoiding the VAT registration in various EU member states. As part of the VIDA reform, the OSS counter will soon cover some physical services as well, such as short-term vehicle and accommodation rentals.
Starting from January 2025, the virtual training sessions will also be taxable in the recipient’s country, exposing the e-sellers to additional VAT obligations for sales towards foreign individuals. The VAT on sales towards foreign tax-payers may be reverse-charged by the service recipients in their country of establishment.
OUR SOLUTIONS
BTOBNICE ensures the EU VAT compliance of international companies specialised in e-commerce :
- VAT registration in foreign countries
- Filing of VAT returns in different countries
- Filing of ancillary returns: ECSL and Intrastat
- Registration and management of OSS and IOSS counters
- Management of French ERTVA and EMEBI returns
- VAT advice and training
Feel free to contact us directly for any additional information and VAT support : contact@btobnice.com
