EC launches public consultation on modernising VAT for cross-border ecommerce

The Commission is seeking to receive a wide range of views from business owners and other interested parties before it drafts its legislative proposals on the topic in 2016, as part of the Digital Single Market strategy.

This consultation is also part of the ongoing assessment of the new rules for VAT payments on cross-border telecommunications, broadcasting and electronic services which came into force last January. The Commission is keen to garner feedback on the associated Mini-One Stop Shop (MOSS), the tool that allows businesses that sell digital services to customers in more than one EU country to declare and pay all their VAT in their own Member State. The consultation will run for 12 weeks and end on 18 December 2015.

The Digital Single Market Strategy
In the context of the Digital Single Market, the Commission is working to minimise burdens attached to cross-border ecommerce arising from the different VAT regimes within the EU. It wants to provide a level playing field for EU companies, big or small, and ensure that VAT revenues flow to the country where the consumer is based. The Commission will make a legislative proposal in 2016 to reduce the administrative burden on businesses arising from different VAT regimes.

The Commission will propose simplification measures for small business including an appropriate threshold which can address the problems without causing further distortions to the single market or compliance challenges for tax administrations. Specifically, the Commission will propose reducing the administrative burden on businesses arising from different VAT regimes including:

• extending the current single electronic registration and payment mechanism to cover the sale of tangible goods;
• introducing a VAT threshold to help online start-ups and small businesses;
• allowing cross-border businesses to be audited only by their home country for VAT purposes;
• removing the VAT exemption for the import of small consignments from suppliers in third countries.

Current VAT rules for e-services

The new place of supply rules for businesses dealing in cross-border telecommunications, broadcasting and e-services came into effect on 1 January 2015. This meant that such goods and services would be taxed in the Member State of the customer buying the product. VAT is a consumption tax, and these rules aim to ensure that the taxation of e-services reflect where consumption takes place. In this way, VAT goes to the treasury of the country where the buyer is based.

As part of the changes, the Mini-One Stop Shop (MOSS) was set up to simplify cross-border VAT payment procedures for ecommerce. For the first time, businesses could register and account for VAT payable to other Member States through a simplified quarterly online return, hosted by the tax administration in their own Member State. Preliminary data indicates that more than EUR 3 billion VAT will be paid through MOSS in 2015 representing approximately EUR 18 billion in sales.

Link to public consultation here.