Why new VAT rules for e-commerce?

Until today, there were major differences in VAT regulations for web shops that sold goods to private individuals in another EU country. There was a turnover threshold between EUR 35,000 and EUR 100,000 per EU Member State.

That threshold was different in each country, which resulted in unequal competition. In addition, web shops were able to establish themselves in countries with an interesting tax regime, while the European Union mainly wants a uniform scheme for every entrepreneur.

If you did exceed that turnover threshold, you ended up in a complex situation . After all, you had to charge VAT according to the applicable rate of the Member State where your customer is located. Moreover, you also had to apply for a separate VAT number in that country in order to be able to file the return.

That led to a lot of errors (and also fraud). And because e-commerce is on the rise, those turnover thresholds were increasingly exceeded. This made the administrative process for applying for VAT numbers and submitting VAT returns very difficult.

In addition, online purchases from outside the EU were exempt from import VAT as long as the value of the product remained below EUR 22. Cheap non-European web shops could take advantage of this, because it gave them a competitive advantage over local merchants.

An inequality in competition and a much too complex VAT structure have led to the European Union introducing a simplified system on 1 July, which we would like to discuss in more detail.

What are the new VAT rules for e-commerce?

The turnover thresholds, which were valid until June 30, 2021 and which differed per Member State from EUR 35,000 to EUR 100,000, have disappeared since 1 July this year. From now on, the same threshold applies to every Member State: 10,000 euros .

This of course means that this amount is exceeded more quickly, but fortunately the EU has also introduced a simplified VAT return so that you no longer have to apply for a VAT number and file a return in each country separately.

For your webshop you will therefore have to take into account the applicable VAT rate for the Member State of your customer more quickly, but there is now a one-stop shop for the VAT declaration of all your deliveries throughout the EU. And that is a major simplification due to the new VAT rules for e-commerce .

OSS and IOSS VAT scheme

In addition to the simplified one-stop-shop (OSS) declaration, since 1 July it is also possible to use an import-one-stop-shop (IOSS) system for ‘small parcels’ with a maximum amount of max. 150 EUR imported into the EU for private individuals. If the price is more than 150 euros, the normal OSS scheme applies.

With this IOSS system, the seller can charge the customer’s local VAT system and make all declarations for the entire EU. In that case, he must register in an EU member state of his choice. The IOSS system is not mandatory, but if the seller does not do this, the customer will pay the VAT in cash to the delivery person on delivery.

By the way, since 1 July this year, all shipments from outside the EU are also subject to VAT . Until now, packages of less than 22 euros were exempt, which put us at a major competitive disadvantage with our own European web shops.

Union scheme VAT

The centralized VAT return (OSS) is done on a quarterly basis and must be submitted via the Intervat portal at the latest at the end of the month following the quarter. The deadline is therefore slightly further than for the normal Belgian VAT return.

Anyone who uses this union scheme for VAT no longer has to meet the invoicing obligation. You can still issue invoices, but the way to do this will be simpler:

No longer has to be prepared according to the billing rules that apply in the EU country of arrival, ie the country of your customer
The invoicing rules of the seller’s country, or at least the Member State where the seller is registered for the OSS regime, apply
For a Belgian webshop, it is therefore the mandatory invoice entries imposed by the Belgian VAT regulations that must be used.
However, it must always be stated in which Member State the distance selling takes place and which VAT rate applies

How to adapt your webshop to the new VAT rules for e-commerce?

Do you already have foreign customers or are you planning to start distance selling soon? Then you are best prepared for the new OSS VAT return . This way you can better estimate the consequences for your webshop. Because by lowering the turnover thresholds, you may well have to pay foreign VAT from now on.

So be sure to check whether or not your turnover in another EU member state exceeds 10,000 euros . If that is the case, you can already register for the One Stop Shop . If you already achieved a high turnover in another EU member state and you have a past VAT number there to file a local return, you may continue to use it. In that case registration is not necessary.

Ask an accountant for advice

Also contact your accountant . Your accounting package must be able to process other VAT rates than just the Belgian one. It is also useful to check whether your products in another Member State cannot benefit from a reduced VAT rate. The local authorities can certainly provide you with that information.

Please note: if the stock of your webshop is located in another Member State and you sell to customers in that Member State, a local VAT return is always required! And so does the application for a VAT number. In that case, the new VAT rules for e-commerce probably do not apply to you.

Technical adjustments to your webshop

Of course you want your customer to see the correct price when he visits your webshop. If your customers (also) come from abroad, that price may differ depending on the applicable VAT rate. The price shown therefore depends on the country of the visitor, a technical adjustment that wekreate is happy to help you with.

Be sure to contact us to discuss the possibilities.