Council Directive (EU) 2017/2455

Council Directive (EU) 2019/1995

Council Implementing Regulation (EU) 2019/2026

Disclaimer: These Explanatory Notes are not legally binding and only contain practical and informal guidance about how EU law should be applied on the basis of the views of the Commission’s Directorate-General for Taxation and Customs Union.

These Explanatory Notes aim at providing a better understanding of certain parts of the EU VAT legislation. They have been prepared by the Commission services and, as indicated above, they are not legally binding.

These Explanatory Notes are not exhaustive. This means that although they provide detailed information on a number of issues, there might be elements that are not included in this document.

From 1 July 2021, a number of amendments to Directive 2006/112/EC (the VAT Directive) will start to apply affecting the VAT rules applicable to cross-border business-to-consumer (B2C) e-commerce activities. The Council adopted these rules by Directive 2017/2455 in December 2017 and Directive 2019/1995 in November 2019 (VAT e-commerce Directives).

The rationale for these changes is to overcome the barriers to cross-border online sales as announced in the Commission’s 2015 Communication “A Digital Single Market Strategy for Europe” 1 and the 2016 Communication on an action plan on VAT “Towards a single EU VAT area – Time to decide” 2 . In particular, the changes will address challenges arising from the VAT regimes for distance sales of goods and from the importation of low value consignments, namely:

✱ As EU businesses selling goods online to final consumers located in other Member States need to register and account for VAT in the Member State of the consumer when their sales exceed the distance sales threshold, i.e. EUR 35 000/100 000. This imposes a significant administrative burden on traders and impedes the development of intra-EU online trade.

✱ Since a VAT exemption is granted for the import of low value goods up to EUR 22 and this exemption leads to abusive practices, Member States lose part of their tax revenues.

✱ Since non-EU businesses selling goods from 3 rd countries to consumers in the EU can make VAT-free supplies into the EU and are not required to register for VAT, they profit from a clear commercial advantage compared to their EU established competitors.

The new rules will place EU businesses on equal footing with non-EU businesses that according to the rules in force before July 2021 do not have to charge VAT, will simplify VAT obligations for businesses engaged in cross-border e-commerce and will deepen the EU single market. The main changes are the following:

✱ Given the success of the VAT Mini One Stop Shop (MOSS) allowing suppliers of telecommunications, broadcasting and electronically supplied (TBE) services to register for VAT in one Member State and to account in that Member State for the VAT due in other Member States 3 , this system will be extended to other B2C services, to intra-Community distance sales of goods as well as to certain domestic supplies of goods, thus resulting in a bigger One Stop Shop (OSS).

✱ The existing threshold for intra-Community distance sales of goods will be abolished and replaced by a new EU-wide threshold of EUR 10 000 below which the supplies of TBE services and intra-Community distance sales of goods may remain subject to VAT in the Member State where the taxable person supplying those TBE services is established or where those goods are located at the time when their dispatch or transport begins;

✱ Special provisions will be introduced whereby a business facilitating supplies through the use of an online electronic interface is deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”);

✱ The VAT exemption at importation of small consignments up to EUR 22 will be removed and a new special scheme for distance sales of goods imported from third territories or third countries of an intrinsic value not exceeding EUR 150 will be created and is referred to as the Import One Stop Shop (IOSS);

✱ Simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 will be introduced, in case the IOSS is not used (special

arrangements);

✱ New record-keeping requirements will be introduced for businesses facilitating supplies of goods and services through the use of an electronic interface, including where the electronic interface is not a deemed supplier.