New VAT e-commerce rules from 1st July

Very important provisions of the EU e-commerce VAT package take effect from July 1 2021. 

In Poland, the bill to transpose the EU directives into domestic law is still pending certain legislative stages, but the anticipated effective date should remain. 

The new EU rules will generally affect all businesses, not only the Polish ones, that are involved in selling goods to customers (B2C) in the EU (both traders who sell goods to consumers in the EU and transport of the goods).

The core of the VAT e-commerce package rules refers to: 

  • Cross-border B2C supplies of goods within the EU (intra-Community distance sales);
  • Cross-border B2C supplies of goods from a non-EU country to a EU member state (non-EU distance sales); and
  • B2C supplies via internet platforms.

Distance sales 

At present, distance sales means the B2C intra-EU supplies of goods with transport. In practice it refers to transactions made via the internet. Currently, suppliers making distance sales that do not exceed a sales threshold (set separately by each EU member state, i.e. €35,000–€100,000) may decide to charge local VAT in the country of destination. 

However, once the sales threshold is exceeded for a specific country, the supplier must register for VAT purposes and settle local VAT in the country of consumption. 

As of July 1 2021 new regulations will affect distance sales by:

  • Abolishing specific country thresholds and introducing one EU-wide threshold of €10,000 below which the supplies of intra-Community distance sales of goods may remain subject to VAT in the member state of establishment (i.e. where goods are located at the time when their dispatch/transport begin); and
  • Introducing a possibility to use one registration (in the country of identification) for purposes of VAT settlements in all EU countries where goods are transported – the VAT one-stop-shop (OSS), in fact the extended mini-one-stop-shop (MOSS).

VAT-OSS 

Generally, there will be certain advantages of using the new VAT-OSS system such as: 

  • One VAT electronic registration for VAT purposes which means that a taxpayer avoids an obligation to register for VAT purposes in many EU member states to which goods or services are sold; and
  • VAT settled by a single return submitted to one EU member state of identification; and
  • Cooperation with the tax authorities of the EU member state of identification even in situations of cross-border distance sales. 

Of course, there are also some disadvantages like the necessity to use VAT rates applied in the consumer’s country. Taxpayers should be also aware that the member state of destination still remain competent to audit the VAT settlements reported via VAT OSS. 

All in all it seems however that using the new VAT-OSS system, which is not obligatory, might be very attractive for VAT taxpayers. 

Source

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