If your company operates cross-border in the B2C (business to consumer) sector, there is a high probability that VAT reporting obligations will arise in other EU Member States as of July 1, 2021 due to the implementation of the eCommerce Directive. Are you affected?
You will quickly find the answer to this question: If your company is already registered in other EU Member States under the previously applicable distance sale regulations and/or uses the Mini-One-Stop-Shop ("MOSS") procedure for cross-border electronic services in the B2C sector, you will be facing changes. From July 1, 2021, new reporting requirements will apply in other EU member states, which will then be almost unavoidable.
Current regulations for distance sales
Until June 30, 2021, the place of supply for distance sales is regulated in art.68.Three of the Spanish VAT Act. The respective country-specific delivery thresholds apply here. Only as soon as these delivery thresholds are exceeded in the respective Member State (end of transport), taxation with VAT takes place in the country of destination.
The tax rates of the respective country must therefore be applied and a registration for VAT purposes must take place. Until the delivery threshold is exceeded, taxation with VAT remains in the country of departure of the goods (there is the possibility of waiving the delivery threshold).
What will change now
The previous MOSS will become a One-Stop-Shop ("OSS") which is extended to certain other supplies of services taxable in the EU to non-entrepreneurs (B2C) and generally to the B2C business for intra-Community distance sales. This also affects distance sales from third countries and certain domestic supplies of goods to non-entrepreneurs supported by electronic interfaces, i.e. a wide range of business activities in the so-called "e-commerce".
The changes in detail
Intra-Community distance sales
As of July 1, 2021, so-called distance sales in the B2C sector, i.e., supplies of goods to non-entrepreneurs (private individuals) and certain equivalent entrepreneurs within the EU, will generally be taxed where the transport ends.
The prerequisite for this is that the supplier has achieved an annual turnover of more than € 10,000 (net) within the entire EU through distance sales and certain supplies of services in the previous or current calendar year or has waived the application of this threshold. The previously known country-specific delivery thresholds for distance sales no longer apply. The de minimis threshold does not apply if the entrepreneur has its registered office, management, permanent establishment or domicile in more than one Member State.
To clarify this point: The new de minimis threshold of EUR 10,000 does not apply to each EU member state (as was previously the case with the distance sale regulation), but rather cumulatively for all EU Member States.
Supplies of services
The de minimis threshold does not only include distance sales as defined in the art.8.Three and art. 68.Three.a) and b) of the Spanish VAT Act (revised), but also certain other supplies of services as defined in art.70.First.4.º and 8.º of the Spanish VAT Act (telecommunications, radio, television and electronically supplied services).
Use of the OSS
The registration obligations for VAT purposes at the final transport destination (in most cases congruent with the customer's country of residence) or the supplies services are avoidable if the supplier chooses the new OSS procedure.
Special taxation procedure for supplies of services performed by traders not established in the Community territory
Another new feature is that the OSS procedure is now applicable to all B2C supplies of services made by companies from third countries if the place of supply is within the EU, section II, Chapter XI of the Spanish VAT Act (revised).
Special taxation procedure for distance sales of goods imported from the territory of a third country.
In addition, the Import-One-Stop-Shop ("IOSS") is regulated by section IV, Chapter XI of the Spanish VAT Act (revised).
for distance sales of goods imported from the territory of a third country in parcels with a value of € 150 or less.
Interface special regulations
Furthermore, special regulations will be introduced for sales after June 30, 2021 that are supported by an electronic interface (for example, Amazon, Ebay, etc.).
By when should affected companies react at the latest?
Regarding the application of the new reporting requirements as of July 1, 2021, there are no transition periods. If the de minimis threshold of € 10,000 in total is exceeded, VAT registration obligations will arise in all affected EU member states.
In principle, the notification must be made before the start of the taxation period from the beginning of which the entrepreneur wishes to make use of the special taxation procedure (in this case: before the 3rd quarter of 2021, i.e. by June 30, 2021 at the latest).
What happens if the affected entrepreneurs do not respond?
If the affected entrepreneurs do not register for the special (I)OSS regime, there are various VAT registration obligations. These are based on the fulfilment of the above-mentioned requirements and the cross-border sales in the B2C area, in the respective EU country, already with the "first euro".
If VAT registrations already exist in all countries concerned, this is unproblematic.
However, if you currently monitor and control the delivery thresholds per country in a way that VAT registrations are not necessary at all, or only in some countries, new registration obligations may arise as from July 1, 2021 due to the new de minimis threshold of € 10,000. This can only be avoided by a timely registration for the (I)OSS procedure.
In this context, it must be considered that for the calculation of the applicability of the new distance sales regulation and the new de minimis threshold for all EU countries in the total amount of € 10,000, the sales of the year 2020 as well as the first half of 2021 must also be included. The regulation on distance sales is only inapplicable if the de minimis threshold of € 10,000 has neither been exceeded in the previous calendar year nor the current calendar year. If you have already exceeded the current supply threshold in one country and also provide the supplies of goods or services described above in other countries, you will be subject to further registrations.
This means an enormous administrative effort, which is avoidable by registering for the special scheme (I)OSS. Then existing VAT registrations could also become obsolete.
How should affected companies act now?
Companies affected by the above points should take care of the far-reaching consequences (particularly the registration obligations) at an early stage.
It is important to consider whether it makes economic sense to remain or become registered abroad for VAT purposes as a "distance seller" or to apply for access to the (I)OSS procedure timely. Furthermore, necessary adjustments in the accounting/ERP system for the "new" business transactions must be checked. In addition, the respective national tax rates must be verified, and the associated country-specific invoicing requirements should be checked.
Those who are already registered for the MOSS procedure do not need to register again for the (I)OSS procedure.