Modernizing The European VAT System For Cross-Border B2C E-Commerce

In a world where e-commerce is on the rise, it has long been recognized that the current European Union Value Added Tax ("VAT") rules and formalities are woefully outdated. Thus, in early December 2016, the European Commission ("Commission") released a proposal ("Proposal") to modernize the VAT regime applicable to B2C e-commerce activities taking place within the EU.¹ At the same time, the Commission has also proposed to tackle the exemption from VAT on goods purchased online from non-EU businesses.

According to the Commission, modernization is required as the current VAT regime: (i) is complex and costly; (ii) leads to revenue losses for Member States; and (iii) blocks the establishment of a level playing field, as non-EU companies seek to benefit from the VAT exemption on imported goods purchased online for less than €22. In addition, the Commission wants to deal with the unequal treatment of paper publications versus e-publications for VAT purposes.