Commission Set to Change VAT Rules for Cross-border E-Commerce

In efforts to accommodate consumers and companies buying and selling products and services online across the EU and minimize the effects of the different VAT rates, the European Commission published a legislative proposal on December 1 to modernize VAT rules for cross-border e-commerce.

The VAT changes aim to extend the current Mini One Stop Shop (MOSS) to cross-border supplies of tangible goods and services, remove the exemption for the importation of small shipments, apply home country rules, and introduce a VAT exemption limit, as well as facilitate start-ups.

“According to our Cross-border E-commerce Barometer 2016, VAT still represents one of the top-3 barriers when selling cross-border in the EU,’’ said Marlene ten Ham, secretary general of Ecommerce Europe.

‘’Dealing with 28 different VAT rules and tax administrations is complicated and burdensome for online merchants, especially for the smaller ones.  Therefore, Ecommerce Europe welcomes the Commission’s plans to make VAT rules fit for the future.”

The example of Paul Edwick, chief executive of Lucy Locket – an SME selling toys online cross-border – is indicative of the current situation:

“The principles of VAT are the same across the EU, but the practicalities are very different country by country. Tax authorities’ websites are complex and I often have to use Google Translate to find my way around. With accountants in two countries, I got first year bills of 9,000 euros and 7,000 euros. We now need registrations in seven countries, so this is highly costly. Extending the MOSS to the sales of goods and services would be a major game changer for all e-merchants selling cross border, especially the smaller ones. With this simplification, I could access all countries across EU at an affordable and efficient compliance cost.”