EU Vat Reforms

Changes to the way in which e-commerce businesses charge VAT on their business to consumer (B2C) sales and subsequently declare and pay this VAT to the relevant authority come into play from 1st July 2021.

What are the new rules?

  • VAT is due at the VAT rate applicable in the customer’s country if the place of supply is deemed to be in the EU.
  • Online sellers can register in one EU member state rather than having to have VAT registrations in each country that they are selling to. (NB, if a business is holding stock in a country, including through Amazon’s ‘Fulfilment by Amazon’ program, they still need to be VAT registered in that country).
  • This one registration will then be used for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers in all EU countries.
  • From 1st July 2021, the current VAT exemption for goods imported into the EU with a value of up to €22 will be abolished and all goods imported into the EU will be subject to VAT.

Import One-Stop Shop (IOSS) Scheme

  • For goods with a consignment value of less than €150, VAT will be due at the point of sale and this can be declared through the Import One-Stop Shop (IOSS) Scheme.
  • IOSS returns will be required monthly and depending on the country in which you are registered, you may need to use an intermediary to submit these.
  • The IOSS scheme is not mandatory, however it is recommended to ensure customers have a good experience. If you choose not to use this, import VAT will still be due by your customer in their destination country. As we have mentioned in the past, customers tend not to like this approach due to the additional wait times for their goods clearing customs and paperwork required their end.
  • For goods with a consignment value of greater than €150, VAT will also be due at the point of sale, but this will be declared through the One-Stop Shop (OSS) Scheme.
  • The VAT due on B2C cross border services will also be declared through the One-Stop Shop (OSS) Scheme.
  • The OSS has two schemes, the Union Scheme, and the Non-Union Scheme. If a business does NOT have an establishment in the EU, they may need to register for both schemes. The Non-Union Scheme will be used to report B2C supplies of services where the place of supply is deemed to be in the EU and the Union Scheme will be used to report sales of goods with a consignment value greater than €150.
  • OSS returns will be required quarterly, and it is believed these need to be submitted and the VAT paid within 20 days of the quarter end.
  • The OSS is not a mandatory scheme and you can continue to register for VAT in each member state should you wish. If you do choose to use a scheme, you will be required to use this for a minimum of 2 years.

Benefits of the new regime

  • One return now covers all EU sales, there is no need to have multiple VAT registrations and submit VAT returns in each country with which you trade.
  • Customers will be paying the same rate of VAT if they buy something from their home country or from any other country. This means businesses are all on a level playing field.
  • EU businesses will be able to grow in a simpler environment without the barriers previously in place to cross-border sales.

Disadvantages of the new regime

  • The IOSS and OSS schemes are for the declaration of output VAT only. If you are wishing to reclaim VAT incurred in the EU, this will still be subject to you meeting the EU VAT requirements that allow you to reclaim this and you would need to be registered for VAT in the EU country in which the input VAT was incurred.
  • Care will need to be taken when pricing goods as you will need to establish which EU VAT rate to apply. As prices are usually shown gross online, you may need to rethink pricing structures due to the fluctuations in VAT rates between each EU country. We would recommend seeking advice from our partner Avalara regarding the correct rate of VAT to apply. Please speak to us for more details.
  • Care will need to be taken when undertaking bookkeeping to ensure these sales are correctly accounted for on your VAT returns. Should you require any assistance with your bookkeeping, please do get in touch with us. We offer a full bookkeeping package with the use of cloud accounting software and can work with you to ensure your bookkeeping is up to date and compliant.

Businesses can register for the schemes now and you will need to consider which country you wish to be registered in. We suspect Ireland will be the most popular choice due to proximity and a key consideration being the lack of language barrier. Details on how to apply can be found here: -

One Stop Shop (OSS) and Import One Stop Shop (IOSS) Pre-Registration 1 April 2021 (revenue.ie)