From 1 July 2021, the delayed changes to VAT rules will be implemented for trade in the EU.
It will apply to many supplies of goods and services, but not all. There are also new simplifications (three One Stop Shops), which will make things more complex for some traders.
Complexities will arise around the boundaries, such as the distinction between supplies within the new rules and not, between supplies eligible for One Stop Shops and not; between choosing to register for One Stop Shop or registering for VAT in multiple EU member states.
The new rules change the way trading relationships involving the EU will be taxed and reported for VAT.
The changes will affect supplies of many goods and services within the EU, whether the suppliers are established within the EU or outside the EU, whether the supplies are exported from GB to the EU or supplied wholly within the EU. Supplies made via electronic interfaces (eg online marketplaces) are also affected, with the electronic interface itself taking on more responsibility.
The changes do not cover all EU supplies, but for supplies which are caught the supplier will be required to register for and pay VAT in every EU member state where the supply is made (for VAT purposes) unless one of the three simplifications is applied. These simplifications (known as One Stop Shops) are optional but can result in complex systems to identify which supplies are to be reported under which simplification and which do not fall under any simplification.
Despite the complexity in operation, the One Stop Shops are effective at cutting down the number of VAT registrations required within the EU. Without using the simplifications for affected supplies, the supplier will be required to register in numerous EU member states.
The rule change from 1 July 2021 is often discussed as being all about a One Stop Shop, all about e-commerce or all about goods. These are only parts of the change. At its heart, the change alters the place where certain supplies of goods are taxed, how import VAT is declared, how much responsibility electronic interfaces share in collecting VAT and how the current mini one stop shop (MOSS) will be amplified.
The technical change to the place of supply will cause thousands of suppliers to become liable to register for and pay VAT in EU member states where goods arrive.
The removal of the Euro 22 import VAT relief threshold will result in many suppliers of non-EU goods becoming liable to register for and pay VAT in EU member states.
Most electronic interfaces will be liable to collect and pay VAT on at least a portion of supplies facilitated through their platform where consignments are valued at Euro 150 or less. As deemed suppliers, the electronic interfaces will become subject to all other VAT rules, including the new changes, requiring them to register for and pay VAT in other EU member states.
The amplification of the mini one stop shop will allow suppliers (including electronic interfaces) to avoid the requirement to register for VAT in numerous EU member states, at least in respect of those supplies which qualify for one of the three new One Stop Shops relating to certain supplies of services, certain supplies of goods and certain imports of goods into the EU.
Further information is available in this new area, however the detail will require discussion in separate articles.
More urgent or more complex queries might require bespoke attention. Our team would be delighted to provide information to businesses and their advisers.
Any business whose supplies involve trade with the EU, whether goods or services, should review its supply chains. Additional EU VAT requirements should be identified. The benefits should be explored before registering for one, two, three or none of the One Stop Shop simplifications.
Electronic interfaces who do not own the goods which are sold via their platform should also undertake the above steps, as they may have new VAT requirements from 1 July 2021.
Standard VAT registration within the EU might be appropriate where registration for One Stop Shops is not appropriate.
For further information and support, please do get in touch with our team who would be happy to discuss and advise.