New VAT rules for e-commerce

19 January 2021

As of the first of July 2021, new VAT regulations for e-commerce will enter into force. The new regulations affect all entrepreneurs selling goods (online) to private consumers in other European countries. It does not matter where the goods come from. This can be either from within the EU or from outside the EU. We will point out the main aspects of the new rules in this article.

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Written by:
Anne Kin VAT specialist
VAT Rules

Purpose of the new rules

The new rules aim to create a level playing field between certain sellers operating from the European Union and sellers from outside the European Union. Also, with these new regulations, the European Union aims to simplify the process of collecting VAT.

Due to the practical difficulties created by the measures taken to contain the coronavirus pandemic, the application of the new VAT e-commerce rules is postponed by six months. Thus, the rules will apply as of 1 July 2021 instead of 1 January 2021, giving member states and businesses additional time to prepare.

Entrepreneurs trading through online platforms such as Amazon, eBay or are subject to special regulations. We will elaborate on these special regulations in our next article.

Current situation

Currently, entrepreneurs supplying goods to private consumers are facing a special VAT scheme. The distance selling scheme applies if your company sells goods to private individuals residing/established in other member states, where the goods are transported or shipped by you or at your expense. For distance selling to private individuals in the Netherlands (by foreign EU entrepreneurs), there is currently still a threshold amount of € 100,000. Above € 100,000, that EU entrepreneur owes VAT to the Netherlands. Upon exceeding the threshold amount, the EU entrepreneur must register for VAT in the Netherlands. Vice versa, a threshold amount of € 35,000 applies for Belgium. Upon exceeding this threshold, your company must register in Belgium and pay Belgian VAT.

Today, EU and non-EU sellers selling goods online to EU consumers are allowed to import the goods into the EU, directly delivering to the consumer, VAT-free if the consignment of good(s) is valued at € 22 or below. From 1 July 2021 the existing VAT exemption for goods up to € 22 will disappear. In order to allow VAT to be levied, all imports into the EU will have to be declared at the border using an electronic customs declaration. The removal of the small consignments exemption will mean that VAT will apply in all cases to imports from non-EU countries. Online sellers will no longer be able to benefit from the exemption by under-declaring the value of the goods.

Considering the enormous volume of low-value consignments imported into the EU, neither declarants nor customs IT systems can handle the production and processing of a standard customs declaration per consignment and in any event a standard customs declaration is not necessary in most of the cases because there is no customs liability for goods of a value below € 150. 

New VAT rules for e-commerce

The threshold amounts per member state will disappear as of the first of July 2021. In the case of distance selling, you can opt to request a VAT number in each member state in order to pay the foreign VAT for distance sales. At the same time, a one-stop shopping scheme will be in effect, in which VAT declaration will only have to be done in one country – the member state where the seller is established. By way of the one-stop shopping scheme, the entrepreneur can pay the foreign VAT via his or her own member state. The Dutch Tax and Customs Administration will ensure further distribution of the VAT. This scheme can be interesting for you because a foreign VAT registration in one or more member states can be dispensed with. 

Small entrepreneurs who deliver/issue less than €10,000 in distance sales and digital services to private individuals may continue to calculate the local VAT over their distance sales. They can also opt to apply distance sales scheme and thus pay foreign VAT via the one-stop shopping scheme (OSS return). 

One Stop Shop-scheme

The One Stop Shop is an electronic system that allows online companies selling telecommunications, broadcasting or electronically supplied services (in short 'e-services') established in the EU or in non-EU countries to declare and pay VAT in a single member state in a quarterly VAT return for all their sales to final consumers in the EU. That member state subsequently distributes the VAT amounts received between the member states where e-services are bought and consumed. It has been in operation since January 2015.

Different customs rules with regards to the importation of goods from outside the EU

The clearance of small consignments from trusted non-EU traders or marketplaces who register with the VAT One Stop Shop will be simplified in terms of customs procedures. Consignments valued up to €150 will no longer be stopped at customs for VAT clearance and VAT collection for these goods will be managed separately on a self-assessment basis. 

What consequences does the new scheme have for you?

Submitting a VAT return and the payment of foreign VAT will be simplified. Moreover, your business does not have to register in each member state in which you deliver to private individuals under the distance sales scheme. Via this OSS return, however, you cannot deduct foreign VAT. To do so, as from the first of July 2021, you must still submit a request for a refund to the Tax and Customs Administration of that member state or request a foreign VAT number there.

More information

Would you like to have more information? Please contact Anne Kin, International VAT specialist, at telephone number +31135915125 or send Anne an e-mail.

Do you want to know more? Our specialist will gladly assist you!

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