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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:
- 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; - 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; - 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; - An annual threshold of €100,000 below which businesses selling cross-border will
benefit from simpler procedures for identifying where their customers are based; - 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. Ne w rules – expected to be introduce d 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. Ne w 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.
Author
DEMETRA CONSTANTINOU
Manager
Demetra.constantinou@kinanis.com
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.
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.