Major EU VAT changes for digital platforms facilitating sales of low value goods

From July 1, 2021, EU VAT rules on the cross border supply of low value goods changes dramatically with new reporting obligations for digital platforms.

Oct 6, 2020

Online selling into the EU is about to change dramatically. From July 1, 2021, digital platforms (e.g. online marketplaces) will be liable for the collection and remittance of VAT on sales made via their platform. The VAT due is set to be based on the place of consumption of the consumer as the EU extends the successful MOSS model, introduced in January 2015 for B2C digital services, to online sales of physical goods and remove the exemption on importation of low value goods. 

The VAT e-commerce package, adopted in February 2020, is one of the European Commission’s priorities under the Digital Single Market strategy with the noble goals of facilitating cross-border trade, combating VAT fraud and ensuring fair competition for EU businesses. The Commission has estimated that member states will gain €7 billion annually through increased VAT revenues. 

One of the key features to achieve these goals is taxation at the place of consumption, no matter the origin of the goods, and the removal of the existing €22 import exemption threshold. In late September 2020, the Commission released its explanatory notes on the new rules. The notes provide more information on marketplace liability and how the new low value goods threshold of EUR150 is to be calculated.

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