E-commerce in the VAT Directive

A Mini One Stop Shop (MOSS) was introduced on 1 January 2015 for B2C telecommunications, broadcasting and electronic services (TBE). This was comprised of two special schemes, the Union scheme and the Non-Union scheme, for companies undertaking operations from a different Member State to where their customers were located or from abroad, respectively. These schemes enabled companies to register and declare the VAT resulting from their provision of TBE services to the different Member States through a single Member State.

The MOSS system was not applicable to any B2C services other than TBE. This meant that any suppliers that were operating from a third country or from a different Member State to where their customers were located, were required to register in each Member State in which they were supplying their services to an end customer if local VAT was to be applied in accordance with the applicable location rules (i.e. accommodation, vehicle rentals, work on immovable property.).

Except for cases that were subject to special taxation. This threshold was between 35,000 and 100,000 euros, with the exact amount varying depending on the Member State. If their sales were below said threshold, B2C distance sellers were not obliged to apply local VAT or register in the country.

This meant that once the distance sales of goods to local customers had exceeded the country’s corresponding threshold, the supplier was obliged to apply local VAT and register in the Member State in order to proceed with the declaration and payment of the applicable VAT.

This scheme, which already existed prior to July 2021 for telecommunications, broadcasting and electronic (TBE) services provided to end consumers, has been modified to also include other types of B2C services that are subject to VAT in the EU Member State where the consumer is located (the Member State of consumption) according to the applicable location rules.

The new E-commerce regulations have not modified the existing rules regarding the place where the services are provided, but rather they offer a simplified procedure for declaring VAT owed in the EU Member States where the service is provided. This is a non-exhaustive list of B2C supplies of services by non-EU established taxable persons that could be declared under the Non-Union scheme: accommodation services, admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events; transport services; hiring of means of transport, etc.

The Union scheme, which already existed prior to July 2021 for telecommunications, broadcasting and electronic (TBE) services provided to end consumers, now covers B2C distance sales of goods and the provision of any other type of services, which according to the applicable location rules are subject to VAT in the EU Member State where the consumer is located (the Member State of consumption (i.e. accommodation, vehicle rental, immovable property works, etc. (the Member State of consumption).

A new import scheme has been introduced to facilitate the management of VAT when importing goods valued at less than 150 euros. This new scheme goes hand in hand with the abolition of the VAT exemption for goods valued at less than 22 euros, one of the changes that was introduced to combat fraud and ensure that the conditions were the same for EU companies as for non-EU distance sellers.

if, according to the applicable location rules their services are levied with the local VAT corresponding to the country of consumption, companies will not be required to be registered in every single Member State in which their B2C E-commerce operations take place. Instead, the VAT on B2C sales may be declared and paid on a quarterly basis through the IOSS system. For this purpose, the companies will be required to submit the aforementioned declaration in their Member State of Identification (which the taxable person will be free to choose under the Non-Union scheme, or which will be the country in which the company is established under the Union scheme).

The VAT owed may be declared and paid through a monthly IOSS VAT declaration, which the company will have to submit themselves. However, in the case of companies that are not established in the EU, or companies with an information exchange agreement, the declaration will be submitted by their appointed intermediary. As with the previous special schemes, the VAT declarations must be submitted in the Member State of Identification, which the company will be free to choose if they are not established in the EU, or which will be the Member State where the company or their intermediary is established within the EU.

Taxable persons who facilitate distance sales of goods through the use of an electronic interface, such as a marketplace, platform, portal or similar means (EI), will be obliged to collect the VAT on those sales.

For this purpose the VAT Directive (article 14 bis) has established a new legal provision in which a taxable person is considered as “a deemed supplier” if they facilitate the following supplies of goods through the use of an electronic interface:

— Goods imported in consignments of an intrinsic value that does not exceed EUR 150 supplied to a customer in the EU, irrespective of whether the underlying supplier/seller is established within the EU or outside the EU.

— Goods which were already released into free circulation in the EU, and goods that are located in the EU and that are supplied to customers in the EU, irrespective of their value, when the underlying supplier/seller is not established in the EU.

The Non-Union Scheme can be used exclusively by non-EU established taxable persons. Even if the taxable person is registered or obliged to register for VAT purposes in one of the Member States for supplies other than B2C services, they will still be able to use the Non-Union scheme for their provision of B2C services.

As of 1 July 2021, the Non-Union Scheme will cover all supplies of services (including TBE services) that are carried out by the taxable persons defined above to end consumers who are deemed supplied in the EU. If the supplier opts to use the Non-Union scheme,they will have to use the scheme to declare and pay VAT for all their B2C supplies of services in the EU.

Here is a non-exhaustive list of B2C supplies of services that could be included in the framework of the Non-Union scheme:

The Union scheme can be used by:

• Provisions of B2C services taking place in a Member State in which they are not established. Any services supplied to customers in a Member State in which the supplier is established must be declared in the national VAT declaration of the respective Member State, irrespective of whether this fixed establishment is involved in the supply of services or not.
• Intra-Community distance sales of goods.

• Intra-Community distance sales of goods.
• Certain domestic supplies of goods (for example when the goods are located in the same Member State as the customer to whom they are being sent) can exceptionally be declared under the Union scheme when an electronic interface is acting as a “deemed supplier”.

Supplies of goods are covered by the import scheme when:

The following taxable persons can use the import scheme:

• Directly (i.e. without the obligation to appoint an intermediary) if they are established in a third country with which the EU has concluded a VAT mutual assistance agreement. This applies only insofar as they carry out sales of goods from this specific third country. As soon as they also carry out supplies from other third countries or territories, they will no longer be able to use the scheme directly, and instead they will have to use the scheme indirectly.
• Indirectly, through an intermediary established in the EU.

• Directly (i.e. without the obligation to appoint an intermediary) if they are established in a third country with which the EU has concluded a VAT mutual assistance agreement insofar as they carry out the sales of goods from this third country.
• Indirectly, through an intermediary established in the EU.

This simplification measure was designed in particular for postal operators or express carriers or other customs agents in the EU who typically declare low value goods for import, either as direct or as indirect customs representatives.

The special arrangements are applicable for the import of the following low-value goods, for which neither the special import scheme nor the standard arrangements for collecting VAT at Customs are used:

In certain conditions, this new scheme affects B2C companies supplying goods or services to consumers in different Member States (distance sales or service providers that are not established in the country of consumption), and it also affects electronic platforms or interfaces that enable B2C sales of their own products or services, or that facilitate their sale to external suppliers.

It is important to note that the fact that a company also undertakes other commercial activity does not mean that it will not be affected by the new E-commerce rules. In fact, a company may face a mixed situation where in addition to using one of the new special E-commerce VAT schemes, they will still have to comply with the general VAT obligations in one or several Member States.

As a general rule, we can conclude that:

• The volume of B2C sales in each of the Member States concerned (the previous thresholds that required local VAT to be charged on sales in excess of the specific amount established by each country have been consolidated and reduced to a total amount of 10,000 euros for all of the company’s B2C operations).
• Whether the company participates directly or indirectly in the transportation of goods.
• Whether the traded goods are supplied by external suppliers that are not established in the EU.
• Whether the traded goods are valued at less than 150 euros or whether they are imported in a Member State other than the country of destination.
• Whether the company consistently asks their customers for their VAT number for B2B transactions and verifies the validity of said number in the VIES database.

In any case, it can be understood that:

Once a company has determined that their operations are included within the scope of the new E-commerce regulations, the next step will be for them to determine the consequences for their operations from a VAT perspective.

The financial department and the tax department, if there is one, should intervene at this stage, as well as the company’s external tax advisors. Given the specialist nature of the subject and the global implications of the changes, the involvement of a network of VAT consultants with the necessary experience should not be ruled out.

This task requires in-depth analysis from a VAT perspective, in order to determine:

Once the VAT implications for the company have been identified, the next step will be to determine whether the company has the capacity to generate the data required in order to comply with the obligations derived from the new E-commerce VAT regulations.

As with the previous step, this task will also require an in-depth analysis, which, in this case must take into account the sufficiency of the data and reporting technology, in order to determine:

This task will also require input from the company’s IT department that will work in conjunction with the aforementioned agents. Likewise, it is important not to rule out the need for external IT consultants, or a network of VAT consultants who can cover the different countries involved.