E-Commerce VAT changes and VAT rates applicable in EU

The European Commission made available on its website a tool that allows you to know the correct VAT rate applicable in each Member State.

This tool, extremely useful also in the light of the new European VAT rules on e-commerce which came into force last July 1, 2021, is available for consultation at the following website: https://ec.europa.eu/taxation_customs/tedb/vatSearchForm.html.

In fact, following Directive 2017/2455/EU and 2019/1995/EU, from July 1, 2021, the existing thresholds for intra-Community distance sales of goods (between EUR 35.000 and EUR 100.000) for each Member State disappear and are replaced by a new annual EU-wide threshold of EUR 10.000, above which intra-Community distance sales of goods become taxable for VAT purposes in the Member State of arrival of the goods (and are therefore subject to local VAT rate).

Consider, for example, a business established (only) in Italy making distance sales of goods to private customers in Germany and France via its own website. Until July 1, 2021, the Italian business had to verify that sales volumes had not exceeded in France and Germany – in the previous year and in the current year – the respective national distance selling thresholds (i.e., EUR 100.000 for Germany and EUR 35.000 for France). If these limits were exceeded, the Italian business had to identify for VAT purposes in Germany and/or in France and apply German and French VAT on sales.

From July, 1, 2021, the annual distance selling thresholds for each Member State disappear. The Italian business must consider only the annual EU-wide threshold of EUR 10.000, above which distance sale of goods become subject to French and German VAT. If the EUR 10.000 threshold is exceeded, the Italian business can either register for VAT purposes in Germany and France (obtaining a local VAT number) or register in the Italian VAT OSS regime (One Stop Shop Portal) online, via the Italian Tax Authorities website. After registration, the business will be able to declare and pay the VAT due in Germany and France via this Italian One Stop Shop Portal.

The new rules may have a relevant impact on price politics adopted. Indeed, where the final price shown in the website include local VAT of the country where the goods are dispatched, there can be a risk of having different net revenues – and therefore profit margins – for the same products depending on the Member State where the goods are sent.

For additional information and questions please contact us and we would be pleased to support you.