Ireland and E-commerce VAT Reforms
The European Commission and Revenue have released new guidance for digital platforms, online retailers and online marketplaces on the E-commerce VAT rules that are set to be introduced from July 1st, 2021.
Under the reforms, online marketplaces and platforms that facilitate supplies of goods to consumers will now become responsible for the collection and subsequent payment of value-added tax.
These rules state that an online marketplace/platform will be deemed to making ‘supplies’ when they;
- facilitate the import of goods from outside the EU in consignments of an intrinsic value not exceeding €150. Regardless of where the underlying supplier is established; and/or
- intra-EU distance sales of goods and domestic supplies of good, regardless of the value of goods, where the underlying supplier is established outside the EU.
Along with other changes, these are being introduced in Ireland and across all the EU member states. Based on provisions included in two EU Directives adopted back in Dec’ 17 and Nov’ 19 (Directive 2017/2455 & Directive 2019/1995), which are being transposed into Irish law through a Regulation.
From July 1st 2021, another key change will be implemented. The change will be the repeal of the current VAT exemption for goods in small consignments of a value up to €22. Essentially, from July 1st this year, all good imported into the EU will be subject to VAT, regardless of their monetary value.
VAT Admin Reforms
In a move to reduce an administrative burden on importers. A new Import One Stop Shop (IOSS) is to be established. Its role will be for the importation of low-value goods that don’t exceed and intrinsic value of €150, excluding goods which are subject to excise duty.
The IOSS scheme will enable suppliers importing goods into the EU to declare and pay the Vat due by submitting a monthly return via the IOSS in the member state that they have registered for the scheme in.
When the IOSS is used, the supplier will charge VAT to the customer at the time of the purchase/supply and the goods will not be subject to VAT at the time of importation.
In the event the IOSS is not used, there is a second simplification mechanism that will be available for imports. With this option, import VAT may be collected from customers by the customs declarant i.e. the postal operator, customs agent, courier firm and so on. They will pay it to the relevant customs authorities via a monthly payment.
It’s the hope, from the new VAT e-commerce package, that by simplifying the collection of import VAT when consumers buy goods online, there will be an increase in compliance rates among e-commerce stakeholders.
The current VAT Mini One Stop Shop in a final change will transform into a One-Stop-Shop.
The Vat Mini One Stop Shop also know as ‘VAT Moss’ is an electronic system allowing taxable persons supplying telecoms, broadcasting, and electronic (TBE) services to consumers in the EU the ability to declare and pay the VAT due in all EU member states in one single member state.
When July 1st, 2021 rolls around. VAT Moss will be extended to all business-to-consumer (B2C) services taking place in member states where the supplier is not established. This will also apply to intra-Community distance sale of goods and certain domestic supplies of good. From July 1st, it will be known as the One-Stop-Shop (OSS).
Under the reforms, the schemes currently operating and covered by MOSS, the Union and Non-Union scheme shall remain in place but with their scope extended.
A key point is that the scope of the non-Union scheme will be extended to all services supplied to consumers that take place in a member state in accordance with the place of supply rules.
What this means, as of July 1st, businesses not established in the EU that supply services to EU consumers will not need to register for VAT in each member state in which their supplies of services take place. The VAT due on these supplies can instead be declared and paid in one single member state via the OSS. Furthermore, the supplier will not be obligated to appoint a tax representative to use the non-Union scheme.
Taxpayers can refer to the detailed guidance released by the EU Commission in September 2020 as well as the new Tax & Duty Manual from the Irish Revenue Commissioners.
The Commission has released a VAT Explanatory Note focusing on the removal of low-value consignment relief and the OSS changes as well as a Customs Guidance Document. This is intended to complement the VAT Explanatory Notes with further clarification and practical examples of formalities, customs rules, and processes applicable to the imports and also the returning of low-value e-commerce goods.