When are online marketplaces responsible for VAT in the EU?

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New EU e-commerce rules take effect from 1 July 2021. The VAT e-commerce package has far-reaching consequences for any business engaged in distance selling to customers in EU member states. But what if, rather than operate your own e-commerce store, you sell via an online marketplace? In that case, the onus for VAT compliance may shift.

When online marketplaces must account for VAT

From 1 July 2021, a digital platform that facilitates sales on behalf of the seller is, under specified conditions, considered the deemed supplier.

There are two scenarios in which the platform is responsible for VAT. First, if an EU business ships goods valued under €150 from outside the EU to customers in the EU. In that case, if the sale is conducted by a digital platform, that platform is responsible for the VAT.

The second scenario concerns a seller not established in the EU that sells to customers in EU member states via an OMP. In that case, the online marketplace is responsible for the VAT.

Businesses should contact a VAT expert if they need clarity on their specific VAT obligations.

VAT implications for sellers

Under the conditions described above, sellers will no longer charge VAT or be obliged to account for the VAT. However, the seller must provide accurate information to the online marketplace.

We can fairly assume that digital platforms will refuse to sell on behalf of any company that consistently fails to provide complete and accurate information.

Selling through multiple channels

Some sellers may run their own e-commerce sites and also sell goods via online marketplaces. Sellers must be aware of the differing VAT obligations in each case and ensure VAT is applied appropriately in either instance.

E-commerce sellers in Europe that sell via their own stores may wish to register for the new One Stop Shop. The OSS promises to simplify VAT compliance for businesses that sell online to customers in multiple EU countries. Using the OSS, you can account for your sales with a single quarterly VAT return.


Disclaimer: Reproduced/Adapted with permission from VATGlobal.

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