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Low Value VAT Exemption

Online Trading Simplified with New VAT Measures

Gareth Bevan 1 December 2016 No comments

European Commission announces new VAT measures to help e-commerce businesses

The European Commission has released details of new VAT measures to simplify online trading for EU businesses.  This follows the Commission’s adoption of the Action Plan for VAT in April 2016 which included a commitment to remove VAT obstacles to e-commerce.

The new measures include:

  • Extending the online One Stop Shop VAT system to goods. This will avoid businesses having to register for VAT in every country they sell goods to consumers.
  • The introduction of two new VAT thresholds; simplifying the VAT obligations for start-ups and micro-businesses selling online.
  • Removal of the VAT exemption for small value consignments imported from outside the EU.
  • Allowing Member States to choose to tax e-publications at the same rate as printed publications.

 

Extending the One Stop Shop

The extension of the One Stop Shop is estimated to reduce administrative burdens for businesses by 95%. This should result in significant savings on the cost of VAT compliance. Currently, compliance is estimated to cost businesses €8,000 per country.

 

Helping small businesses

The changes to help start-ups and micro-businesses include the introduction of two thresholds for cross border sales:

  • €10,000 per annum
  • €100,000 per annum

Businesses operating below the €10,000 cross-border threshold will be able to apply domestic VAT rules to their sales.  In future, businesses selling e-services below the €100,000 threshold will only require one piece of evidence to identify the location of their customers (currently it is two).  In addition, the current requirement to retain 10 years’ records will be removed and businesses will apply the record-keeping requirements of their home Member State.

 

Removal of the small value consignment exemption

Currently consignments of €22 or less imported from outside the EU are exempt from import VAT.  This system has been open to fraud and abuse and resulted in huge tax losses.  Removal of the exemption is intended to address these issues and level the playing field for EU businesses.

 

Equalising the VAT treatment of e-publications and the printed equivalent

Under current VAT rules, e-publications must be taxed at the standard rate of VAT. In many Member States printed publications are taxed at reduced, super-reduced or zero rates.  These proposals will allow, but not require, Member States to tax both types of publication at the same rate.

At this stage, the changes are just legislative proposals and will now be submitted to the European Parliament for consultation and to the Council for adoption.

For the full EU press release see here.