The European Commission has recently published Explanatory Notes on the new EU VAT e-commerce package to be introduced from 1 July 2021 (link to: Explanatory Notes). The document contains extensive explanations and clarifications on how the new rules should be applied by online suppliers or electronic interfaces (e.g., marketplaces and platforms) involved in e-commerce transactions, so that they get a better understanding of their VAT obligations arising from cross-border supplies to private consumers in the EU.
Similar to VOEC system in Norway, as of 1 July 2021, almost all online suppliers will need to ensure that VAT on sales of goods or services (mainly online) to private consumers (B2C) is paid to the Member State in which the supply takes place, in line with the principle of taxation in the Member State of destination (i.e. customer’s location).
The EU Commission has introduced the above-mentioned VAT e-commerce package so as to simplify the VAT obligations for companies carrying out such cross-border sales. In the earlier blog, we have presented the main and most significant changes that are resulting from that package, i.e. :
- New rules for VAT treatment of imported goods to the EU market. This implies (i) removal of the import VAT exemption in EU for low-value consignments (below EUR 22), and (ii) simplified reporting of local VAT on distance sales of low-value goods (not exceeding EUR 150) from outside the EU to private individuals through a new import scheme, called - Import One Stop Shop (“IOSS”), or an alternative simplified mechanism for customs declarants (e.g. postal operators, couriers, etc.).
- New rules for electronic interfaces (such as marketplaces or platforms), which qualify them (under specific conditions) as deemed suppliers of goods sold to end customers in the EU, and make them liable to collect and pay VAT on these B2C sales.
- Extension of the Mini One-Stop Shop to a One Stop Shop (“OSS”) to deal with all types of cross-border services to end customers in the EU (where the place of taxation is in the EU), as well as distance sales of goods to EU final consumers.
Explanatory Notes on VAT e-commerce rules - what should you know?
Explanatory Notes provide guidance about how particular provisions of EU VAT law should be applied. Although not legally binding, these documents form part of the Commission guidelines on VAT and contain practical information about EU VAT-related issues of relevance. The issuance of the aforementioned guidelines should therefore increase legal certainty to some extent for e-market suppliers. However, the harsh reality is that Explanatory Notes in this field are quite an extensive document (99 pages), which might be really difficult to digest for affected taxpayers.
The application of the new set of VAT rules - including VAT identification, registration and reporting requirements - will depend on the existing business or distribution models and, more concretely, on the interpretation of several concept definitions and examples included in the guidelines. It is therefore necessary for all Norwegian businesses involved in the e-commerce industry across Europe to get familiar with the new obligations and to assess the impact of the new rules for their current business, adapt their internal processes and ERP systems, or consider a change of business model so as to benefit from potential simplifications.
How the new rules and their interpretation under the Explanatory Notes may impact Norwegian businesses?
All non-EU suppliers (including non-EU electronic interfaces) involved in B2C e-commerce transactions to- or within- the European Union will be affected by the new rules. Non-EU suppliers can register under special simplified schemes:
- One Stop Shop (“OSS”) - telecommunications, broadcasting and electronic (“TBE”) services to consumers.
- Import One Stop Shop (“IOSS”) - low-value goods to consumers.
In order to conclude which of the special schemes should (and could) be used by the non-EU suppliers the various factors will need to be taken into account, such as among others: type of the supply, value of the goods, location of the product at the time of the sale (EU or outside EU), involvement of the electronic interface in the sale, etc. There are also several factors that need to be taken into account when assessing where a non-EU supplier should register (so called Member State of identification).
The table below presents simplified overview on special schemes available for non-EU established suppliers under the new rules including basic information on these schemes:
How can PwC Norway help your company to prepare for the new changes?
Although aimed at simplifying VAT obligations for e-commerce businesses carrying out cross-border sales of goods (and certain services) to final EU customers, the application of the new VAT rules as well as the interpretation of the Explanatory Notes could lead to a really complex and time-consuming process. However, it is also true that the drastic changes on VAT e-commerce rules might imply not only challenges and new compliance obligations, but also potential opportunities to Norwegian companies that currently sell online to EU customers.
PwC Norway has experts in EU VAT and Customs legislation and procedures that can assist your company in various ways, in particular:
- Assess the impacts of the rules to be implemented on 1 July 2021 on your business model; including non-compliance risk assessments or evaluation of the impact on the pricing of products.
- Analyze the business and legal implications of the different options available (ordinary VAT registrations in the relevant EU Member States, registration under the OSS/IOSS declarative system, sales through facilitating marketplaces and change in the business models).
- Implement any changes to systems and processes so as to comply with the new rules.
- Assist with VAT registration under the OSS/IOSS declarative system in any EU Member State.
- Assist with VAT reporting.
To get a brief overview of how the recently published Explanatory Notes could impact you, and how to start working internally to become fully compliant with the VAT e-commerce package to be implemented next July 2021, do not hesitate to contact us.
This blogpost is written by Diana Geilhufe and Luis Leon Baron.
Jeg heter Luis Leon Baron og jeg har en Master of Law (LL.M.) innen bedriftsbeskatning. Jeg har jobbet med merverdiavgift i PwC Oslo siden august 2019, med internasjonale mva-spørsmål og EU-mva spesialfelt. Mine kunder er selskaper innen forskjellige sektorer, men fellesnevneren er at de er involvert i grenseoverskridende transaksjoner. Jeg bistår også ofte i forsyningskjede-problematikk, og vurderinger av EUs toll- og avgiftspraksis mer generelt. Før jeg kom til Oslo, jobbet jeg fem år i PwC Spania som skatterådgiver innenfor indirekte beskatning.
My name is Luis Leon Baron, and I am a Master of Law (LL.M.) in Corporate Tax Advisory working in the indirect tax team in PwC Oslo. I joined the indirect tax practice of PwC Norway in August 2019. I specialize in international and EU VAT issues and have a broad experience in advising companies from different business sectors. I am usually involved in the analysis of cross-border transactions and supply-chain issues from a VAT standpoint, but have been also involved in projects regarding the EU customs and excise duties practice in the past. Prior to that I worked five years in PwC Spain also as an indirect tax advisor.