Article – EU commission proposal on E-commerce

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Article –
European Commission proposes new VAT rules to support e-commerce and online
businesses in the EU

On
1 December 2016, the European Commission has published proposals to improve the
Value Added Tax (VAT) environment for e-commerce businesses in the EU.
Particularly, the proposed changes, aiming to allow start-ups and SMEs, to buy
and sell goods and services more easily online.

Specifically,
the proposal refers to:

  1. The introduction of a single portal ('One Stop
    Shop') through which businesses could account for VAT due on supplies of goods
    and services in other Member States aiming at the reduction of the VAT
    compliance expenses of the e-commerce businesses they currently encounter;
  2. The removal of the import VAT exemption of €22 for
    small value consignments entering EU from outside the EU aiming to provide a
    level playing field to EU businesses;
  3. >An annual threshold of €10,000 below which
    businesses selling cross-border could continue to treat sales as though they
    were domestic, aiming to minimise burdens attached to cross-border e-commerce
    arising from different VAT regimes;
  4. An annual threshold of €100,000 below which
    businesses selling cross-border will benefit from simpler procedures for
    identifying where their customers are based;
  5. The option allowing Member States to align VAT
    rates on electronic and printed publications aiming to correct the less
    favourable VAT treatment of e-publications compared to printed publications.

Subject
to agreement by the Member States, the proposed reforms could start as early as
2018.

A. New
rules – expected to be introduced in 2018

 A1. New VAT Rules for sales of services
electronically

Currently, businesses selling cross-border electronic services have to register
in ALL the Member States to which their customers are based, no
threshold exists.

With
the proposed action, businesses selling cross-border electronic services
without exceeding a threshold of €10.000 per annum can opt to apply the rules of their home country. This rule simplifies the VAT treatment for a large number of small businesses which can remain out
of the Mini One Stop Shop (MOSS) regime, this way.

Moreover,
this would result to the use of familiar domestic VAT rules regarding the
invoicing requirements and record keeping rather than the ones applicable in
the Member State of the customer, as it currently applies.

Also,
small businesses will no longer be audited by each Member State where they have
sales, but by the tax administration where the business is located.

Another
simplification for SMEs selling online services, is the fact that if their yearly
turnover remains below €100.000, these companies will only have to collect one
proof of evidence to prove their customer's location. Currently, they are
required to collect two pieces of evidence.

A2. Equal vat
rate for e-books,
e-newspapers and their printed equivalents

Currently,
Member States are allowed to tax printed publications such as books and
newspapers at reduced or in some cases zero rates, whereas their electronic
equivalents, e-publications, are subject to standard rate.

The
Commission proposes to grant all EU Member States the possibility to apply the
same VAT rates to e-publications as they currently apply to their printed
equivalents (possibly reduced rates).

B.
New rules – expected to be introduced in 2021

B1. New VAT Rules for
sales of goods electronically

The
simplification rules described above for the sale of electronic services are
expected to be extended to the online sale of goods by 2021.

B2.
VAT One Stop Shop portal

Currently,
online traders engaged in the distance selling of goods are obliged to register
for VAT in the EU Member State of their non-business customers.

As
of 2021, the one stop shop, (similar to the MOSS, currently available for the
sale of services electronically) is expected to be extended to the online sale
of goods (distance sales).

This
will be a significant simplification for online traders engaged in the distance
selling of goods, since they will be able to handle the VAT obligations across
the several member states via the use of an online portal, the "One Stop
Shop” by submitting only one simple quarterly return. Consequently, such a
reform will significantly reduce the vat compliance cost online traders
currently encounter.

B3. Abolition of thresholds for imports

Currently,
import into the EU of packages with value less than €22 per consignment is
exempt from VAT. This exemption is expected to be abolished as of 2021.

Disclaimer

This
publication has been prepared as a general guide and for information purposes
only. It is not a substitution for professional advice. One must not rely on it
without receiving independent advice based on the particular facts of his/her
own case.  No responsibility can be accepted by the authors or the publishers
for any loss occasioned by acting or refraining from acting on the basis of
this publication.

February 2017

Our
Firm

Kinanis LLC, a law and
consulting firm, is one of the leading and largest business law firms in Cyprus and advises for over 33 years the international investor and private clients on
all aspects of law, tax and accounting.

Kinanis LLC
absorbed the business of its shareholders which are in the legal and consulting
profession since 1983, with local and international dimensions.

Experience and
practice over the years brought forward the need for transformation from a
traditional law firm to a more innovative multidisciplinary firm providing a
full range of services combining law and accounting with the extensive
expertise in corporate and tax advice to ensure that our clients will obtain
the best possible spherical advice adopting the principle as to the services
offered "All in one place", so that the client will find a quick,
correct and efficient solution to its daily legal, accounting and tax issues in
a trustworthy environment.

This combination of
legal, accounting and tax services through our well qualified personnel and our
involvement and participation in international transactions over the years,
have established our firm as one of the key players in the field. Our
involvement in international financial transactions has also provided us with
the extensive expertise in representing groups, corporations, funds as well as
the private client.

The firm is staffed with around 80 young, energetic and
ambitious professionals, including lawyers, accountants and administrators who
provide prompt, efficient and high quality services and who are capable of
meeting the current demanding challenges of the local and international
business environment.

We always
look to give solutions in a simple and as possible quick way focusing on the
needs of each client trying to anticipate the issues before becoming a problem.

Kinanis
LLC

Lawyers’ Limited Company

12 Egypt Street, 1097, Nicosia

P.O. Box 22303, 1520 Nicosia, Cyprus

Tel: + 357 22 55 88 88 – Fax: + 357 22
66 25 00

E-mail: KinanisLLC@kinanis.com – Web site: www.kinanis.com

Corporate Division

Christos P. Kinanis

Fax: +357 22 76 28 08 corporate@kinanis.com

Accounting Division

Charalambos Meivatzis

Fax: +357 22 75 14 74

accounting@kinanis.com  

Litigation Division

Andrianna Solomonides

Fax: +357 22 45 81 95

litigation@kinanis.com

Banking Department

Myroulla Kyriacou

Fax: +357 22 75 39 banking@kinanis.com

Tax Department

Marios Palesis

Fax: +357 22 75 14 74

tax@kinanis.com

 Accounting & VAT Department

Demetra Constantinou

Fax: +357 22 75 14 74

accounting@kinanis.com

 

 

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