The EU VAT for e-commerce changes in 2024

EU VAT for e-commerce is changing is 2024, and as a business owner, you will need to know what you need to implement and how it benefits you. While Britain’s Brexit status is still far from confirmed, forewarned is forearmed with taxes and legislation.

If you’re VAT registered or are likely to become so in the next 12 months, then the EU VAT for e-commerce changes could impact your decision on how you move forward. By preparing early, you can make sure your business adheres to the regulations, capitalises on potential gains and isn’t caught unaware.

The changes to EU VAT for e-commerce

In 2018, the European Commission announced that changes would be coming into force in January 2021. The aim was to simplify EU VAT for e-commerce businesses conducting international sales and ensure the correct Member State is paid. Under VAT legislation, the VAT must be paid to the Member State of the customer, not the business.

The ethos behind the legislation is that it will make for a fairer marketplace across the EU and encourage more international sales. It will also reduce the risk of intentional or unintentional VAT miscalculations. It is all part of the EU’s Digital Single Market E-commerce plan that also included the PSD2 directive.

What has changed?

The EU Vat for e-commerce business changes are being rolled out in stages, with many changes already completed. First, there was the introduction of two VAT thresholds for small and micro e-commerce businesses at €10,000. E-commerce businesses below this threshold can opt-in, although you must do so for a minimum period of 2 years.

The one-stop-shop portal

One of the biggest headaches over EU VAT for e-commerce business owners was the paperwork. Having to register and submit separate VAT returns to each Member State was an unnecessary burden. The One-Stop-Shop Portal (OSS) is a hub that allows all your EU VAT obligations to be dealt with in one place in your native language. It is currently in place for telecommunications, broadcasting and electronic services and has been running smoothly since 2015 under the umbrella of the Mini-One-Stop-Shop portal (MOSS). It has now been rolled out to all e-commerce businesses conducting business in the EU.

Additionally, e-commerce sales accounted for on the OSS will not need to issue VAT invoices.

You will also have longer to file your returns, with submission deadlines being extended from the 20th to the end of the calendar month.

Leveling the playing field

Large online marketplaces will be responsible for VAT being collected on sales by non-EU companies if they are selling to EU customers. Once again, this will help to level the playing field between EU e-commerce business owners, like you, and Asian e-commerce businesses on Amazon and similar platforms. In the event of non-payment under these circumstances, the online marketplace will be responsible for the VAT liability, so it is safe to assume it will be heavily policed.

This is particularly targeted at non-EU e-commerce businesses selling their goods through storage facilities or fulfillment centres within the EU.

How does the EU VAT for e-commerce change affect you?

As an e-commerce business owner, you should benefit from a greatly reduced VAT compliance cost on your international sales. The hope is that this, in turn, will spur your business on to create greater amounts of international sales, which boosts your potential customer-base and allows you to trade with those in more countries.

The amount of time eaten up by EU VAT returns will be greatly reduced, increasing productivity.

Additionally, by reducing the barriers to those who are VAT registered, you will be able to compete on a more level playing field with non-VAT registered e-commerce businesses.

The new VAT Compliance Environment

As businesses fall in line with the new VAT in the Digital Age (ViDA) initiative, we’re seeing a significant modernisation of the entire EU VAT system. Some of the key aspects of the ViDA initiative that are set to roll out between 2024 and 2028 include:

• Digital Reporting Requirements (DRRs): The EU is making it mandatory for businesses to use electronic invoices and reporting for cross-border trade. This will give tax authorities better data to catch fraud and collect more VAT.
• VAT Treatment of the Platform Economy: The ViDA plan wants online marketplaces like Airbnb and Uber to collect the sales tax for rentals and rides, even if the owner or driver didn’t. This makes things fairer for regular businesses and easier for small companies and freelancers to follow the tax rules.
• Single VAT Registration and Import-One-Stop-Shop: Rather than registering for taxes in each country you trade across, you can register for one system and be covered across the EU. This saves businesses, especially small ones, a lot of time and money on paperwork.

Next steps

If you’re worried about how EU VAT for e-commerce is changing or want help planning for any other upcoming legislation or Brexit issues, get in touch with our team of e-commerce experts today.