Earlier this year, a new e-commerce scheme was introduced in Norway for reporting VAT on cross-border B2C sales of low-value goods to Norwegian consumers. Within the framework of the new cooperative approach taken by the tax authorities, foreign taxpayers were informed by letter about the VOEC experience so far, as well as some minor clarifications made on the VOEC scheme.
New e-commerce VAT rules were implemented in Norway from 1 April this year. Please read our blog describing the details in the Norwegian VAT on e-commerce (VOEC) rules and our previous update on this matter.
Experiences so far and slight challenges
It is not news for foreign businesses selling low-value goods to Norwegian end consumers that Norway changed the VAT rules on e-commerce earlier this year and introduced a new simplified scheme (VOEC, VAT on E-Commerce) intended for foreign sellers to manage their VAT liability.
As part of their new collaborative approach, Norwegian tax authorities issued a letter to all businesses registered in VOEC including some information and updates about the new simplified scheme. They also sent a reminder of submission of the 2Q 2020 VOEC return, together with a link to a step-by-step manual and tutorial to make reporting easier for taxpayers.
In their statement, Norwegian tax authorities informed that more than 950 online platforms adhered to the public list of companies that have registered under the new VOEC scheme. While certain marketplaces have benefited from the transitional provisions to be given extra time to make the necessary technical system / business models adjustments, several of these are now fully compliant to the delight of the authorities.
However, ongoing problems identified by the authorities in the up-and-running system are mainly the following:
No consignment marking: It is a requirement that shipments of goods under the VOEC scope delivered by VOEC-registered platforms shall be marked with the VOEC number, either on the label or in the electronic delivery note to the transporter. Tax authorities encourage foreign sellers to ensure the marking is done correctly in order to avoid the risk of double taxation and also additional refunds or requests. In addition, they request the sellers to include their name and address info in the consignments for easier identification.
Refunds when there is a return of the goods: In cases of refunds or return of the shipped goods, the responsibility on reimbursement of the VAT to the consumer remains on the foreign suppliers. Norwegian tax authorities detected an increase of inquiries from the customers asking about this issue, which has to be addressed by the platforms.
Customer service’s “apparent” lack of knowledge about VOEC: Norwegian tax authorities urge the platforms’ customer services to be trained and updated on VOEC key features and not to refer consumers to them on e.g. VAT reimbursement when returning the goods.
Minor adjustments and clarifications in VOEC guidelines
Further, VOEC guidelines have been amended by the Norwegian tax authorities due to minor adjustments and clarifications after VOEC implementation. Find a more detailed overview on the most significant changes below:
Bundling - multiple goods in one order: It is now clarified how to treat sales when sending items falling within and out VOEC scope together in the same shipment. If sold in the same transaction, foreign sellers may choose not to charge VAT on items covered by the VOEC scheme, so that they make the whole consignment subject to taxation at the border (import VAT and duties or other fees if applicable).
Having said that, suppliers are still obliged to register for VOEC purposes and collect and pay VAT on shipments consisting only of low-value goods.
Ordinary VAT registration vs. VOEC registration: Suppliers holding a business address in Norway or being VAT-liable for any other supplies of goods or services are required to register under an ordinary VAT registration for all their taxable supplies, including the sale of low-value goods (no option for the simplified VOEC scheme).
The tax authorities have stated that suppliers with a "high degree of business adaptation towards the Norwegian market" will not be allowed to register for VOEC, since these suppliers have an obligation to register under the ordinary VAT scheme. This obligation for foreign established companies to register under the ordinary scheme is based on a view that suppliers with a high degree of business adaptation to the Norwegian Market are in fact supplying goods locally in Norway to its customers, rather than performing an export sale from abroad. This interpretation of the rules is based on administrative practice and a couple of court cases, whereby an overall assessment shall be made - i.e. whether (i) the supplier looks like a Norwegian business from a Norwegian customer’s point of view, (ii) the business is marketed towards Norway and/or (iii) the goods are formally considered as delivered in Norway.
Finally, quite a number of foreign companies already supplying goods in the Norwegian market through an ordinary VAT registration might reconsider switching to the simplified VOEC registration and reporting. In order to do so, suppliers must fulfill VOEC requirements, including not being deemed as Norwegian businesses (see above). As previously mentioned, a combination of both types of VAT registration in Norway is not allowed.
Registration liability threshold: Foreign sellers are obliged to register under VOEC at the time the total value of shipments to Norwegian end consumers exceeds NOK 50,000 during a 12-month rolling period (same threshold as for the ordinary VAT registration). For the sake of clarity, this 12-month period has started as from 1 April 2020, date when the VOEC scheme entered into effect.
In order to determine the VOEC registration liability, only VAT-liable and zero-rated turnover is taken into account. However, there is still the possibility to voluntarily register in the simplified scheme if the relevant requirements are duly met.
Correction of VOEC reporting: In the letter, the tax authorities specify that in case of returns, it is not a condition for making corrections in VOEC reporting that the goods are transported out of Norway. It is sufficient that the supplier reimburses the customer the full amount (including VAT) to be entitled to make corrections in their VOEC reporting.
The boost of e-commerce (even more significant as a consequence of the Covid-19 pandemic) has obliged countries all over the world to introduce or plan to implement simplified schemes similar to VOEC.
As in other occasions, Norwegian tax authorities are one of the pioneers in the field of indirect taxation and have no fear of communicating that VOEC experience so far is running smoothly. Their cooperative and open attitude seems to be an efficient way to approach taxpayers and invite them to adhere to the new rules by making compliance and reporting simpler.
Uncertainties on the recently implemented scheme will gradually disappear. However, we still recommend that businesses monitor carefully the updates and adjustments in VOEC and work internally where applicable.
We also suggest analyzing whether changes to the current business set-ups will make possible for companies that are still not VOEC-registered to benefit from the new simplified VAT scheme. As per the experience so far, it could be worth exploring the possibility of taking advantage of VOEC so as to avoid any negative business impact within the Norwegian market in the near future.
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.