EU 2021 VAT changes – selling via online marketplaces EU 2021 VAT changes – selling via online marketplaces

In this article, we discuss the impact of the upcoming EU VAT changes on Swiss sellers who sell via Online Marketplaces.

As of 1 July 2021, an online marketplace (referred to as an “electronic interface” in the EU VAT law), which facilitates (as defined by the EU VAT law) the following sales would be subject to the deemed supply rules:
 

• Sales of any value by a non-EU seller to a consumer within the EU. This includes domestic sales or intra-EU distance sales; and
• Distance sales of imported goods by both EU or non-EU sellers to consumers of consignments not exceeding EUR 150.

When the deemed supply rules are applicable, a sale between a seller and a customer is split into two transactions for VAT purposes:
 

1. The seller is deemed to have sold the goods to the marketplace.
   This is a B2B supply, no EU VAT is due on this transaction.
2. The marketplace is deemed to have sold the goods to the consumer.
   This is a B2C supply and the marketplace is responsible for collecting the VAT due on the sale from the consumer.

Please see below examples to explain the rules.

A Swiss seller sold goods to a French customer (B2C) via a marketplace. Goods are shipped from a warehouse in Germany to the French customer.
 

• Currently
  The Swiss seller needs to register for VAT purposes in Germany. Assuming the seller has exceeded the distance sales threshold in France, he also has registered for VAT in France. The sale is subject to VAT in France and should be reported in the seller’s French VAT return.
• As of 1 July 2021
  The Swiss seller is deemed to have sold the goods to the marketplace. This is a 0% B2B sale in Germany, which the Swiss seller should report in its German VAT return, although no VAT will be paid on this deemed supply.
  The marketplace is deemed to have sold the goods to the French customer. French VAT is due on this B2C transaction. The marketplace can either register in France or use the One-Stop-Shop (OSS) regime to account for and report the French VAT due.

A Swiss seller sold goods to an Italian customer (B2C) via a marketplace. Goods are shipped from a warehouse in Switzerland to the Italian customer. The value of the shipment is not exceeding EUR 150.
 

• Currently - The VAT treatment will depend on how the import is declared.
  • If the customer is the importer of record, he will pay import VAT due (import VAT is exempt for shipments not exceeding EUR 22) plus potentially an additional handling fee. The seller in this case does not have any VAT compliance obligations in the EU.
    o If the seller is the importer of record (sales under the Incoterms “Delivered Duty Paid”), the seller will pay import VAT due. In addition, the seller is required to register for VAT in the country of importation

• As of 1 July 2021 - The VAT treatment will depend on whether the marketplace uses the Import One Stop Shop (IOSS) regime.
  • If the marketplace uses the IOSS regime, the Swiss seller is deemed to have sold the goods to the marketplace outside the EU, the Swiss seller has no VAT compliance obligations in the EU. The marketplace will account for VAT on the deemed supply to the Italian consumer using the IOSS regime. The Swiss seller needs to provide the marketplace’s IOSS number to the logistic provider to avoid VAT being charged upon importation.
  • If the marketplace does not use the IOSS regime, VAT is due on importation. The country of importation can determine, who is the importer and should therefore pay the import VAT due. Unless the country of importation determines that the Swiss seller is the importer, the Swiss seller should not have any VAT compliance obligations in the EU.

As shown above, under the deemed supply rules, the EU VAT compliance obligations for Swiss sellers selling via online marketplaces should therefore be reduced.

If you are interested in learning more about the upcoming changes as of 1 July 2021 and our services, please reach out to us.