New VAT obligations for electronic marketplaces

in Tax, 27.05.2021

It was high time we updated our tax rules to reflect the growing importance of digital platforms for the European Economy. Once the new rules (…) are adopted and implemented, national authorities will automatically exchange information on the revenues generated by sellers on these platforms, and those sellers will benefit from simpler administrative procedures. This is good news for the public purse and good news for honest entrepreneurs.” Paolo Gentiloni, European Commissioner for Economy.

Welcome to this two-part blog series where we clarify the new obligations for digital platforms. These obligations are an integral part of the ambitious tax agenda foreseen by the European Commission for the coming years to tackle tax fraud linked to e-commerce

The new One-Stop-Shop (OSS) / Import-One-Stop-Shop (IOSS) will apply as from 1st July 2021 to digital platforms (Part 1) followed by additional obligations after the implementation of DAC 7 as from 1st January 2023 (Part 2).

OSS / IOSS: what does it mean for digital platforms?

Due to the development of new technologies and the globalization of economy, e-commerce has been growing very rapidly, offering customers new buying channels through online platforms. In a bid to make the global environment fairer and simpler, and to better tackle VAT fraud linked to the supply of goods through the internet, the EU Commission has decided to implement new rules.

From 1st July 2021, digital platforms will face additional VAT obligations in the EU, meaning they may become “deemed suppliers” as well as have specific record-keeping obligations.

If a digital platform (marketplace, platform) facilitates distance sales of goods by a non-EU established seller to a B2C buyer located within the EU, it is deemed to be the seller and it is liable for the payment of VAT.

In addition, digital platforms have record-keeping obligations of the facilitated transactions, even when they do not act as deemed suppliers. This obligation remains in place for 10 years and the records must be made available electronically.

To declare the VAT on intermediated sales, the platform will have the option to use specific electronic portals: the new OSS as illustrated below. This OSS should, in principle, be used by EU established companies selling to consumers throughout the EU.

Supplies of goods covered by the deemed supplier provision

Click on the image to enlarge.
Source: European Commission Directorate General Taxation and Customs Union: Explanatory Notes on VAT e-commerce rules

Further to the abolition of VAT relief for the import of goods not exceeding €22, any good imported will be subject to VAT.

When the sale of such goods is “facilitated” by a digital platform, the platform will be considered as having made the sale and will, in principle, be liable for the payment of VAT provided the amount of imported goods does not exceed €150.

This VAT should be declared via the new IOSS when the distance sale of goods does not exceed €150. If the supplier sells several goods to the same buyer and these goods are shipped in a package for an amount exceeding €150, they will be taxed at importation in the EU Member State, and the platform will not be liable for the payment of VAT.

The IOSS can  be used by non-EU established companies selling goods to EU consumers. As a consequence, the non-EU seller should be liable for VAT in case the sale exceeds €150 or if the sale is not facilitated via an electronic interface.

What’s next?

This significant VAT obligation imposed by the EU Commission is a means to better tackle VAT fraud. The story doesn’t end here, however, as these tools are not the only requirement platforms may face.

Don’t miss Part 2 where we take you through the new record-keeping (and related reporting) obligations of digital platforms due to DAC7.

More questions? Reach out to KPMG’s Indirect Tax team, Laurence Lhote or Quentin Warscotte!