The European Union effective 1st July 2021, is implementing the new EU-VAT e-commerce for its operations. Under the new provisions, apart from the regular sellers, online marketplaces also come under the precincts of taxation.
Online marketplaces are tagged as ‘Deemed Sellers’ and are responsible for collecting, submitting and paying VAT. To assign VAT liability for online marketplaces, it is necessary to know the following details:
- Location of the buyer ordering goods, identified through billing etc.
- Sale Items’ current location as ordered by the buyer.
- Value of the items’ ordered by the buyer can be either per item or per consignment.
- Who is the underlying seller of the goods?
What is an online marketplace and when does it become a ‘Deemed Supplier’?
Before embarking much into details, let us understand:
Electronic Interface is the term preferred by the EU for online marketplace, platform, portal etc. Their notes state that an online marketplace “could encompass a website, portal, gateway, marketplace, application program interface (API), etc.”
Any individual using the interface of online marketplaces for supplying goods is called a ‘Deemed Seller’. They are entitled for tax payment guided by the following criteria set by EU VAT authorities:
A. Goods ordered value not exceeds Euro 150
- Customer based in EU
- Product imported to EU
- The seller can be either established in the EU or non-EU
B. Goods released into free circulation in the EU
- Customer and product both based in EU
- The seller established outside the EU
- There is no value limit for the goods ordered
The online marketplace needs to register under IOSS for goods imported . If they do not prefer to register, they are not liable for taxation. In the case of goods available within the EU and sellers based out of the EU, the online market place either can register under OSS or register individually in the country where the customer is located.
Exempted as “Deemed Supplier”:
The following online marketplaces are exempted from classification as ‘Deemed sellers’ if they provide any of the followings:
- Advertising goods
- Processing payment with supply of goods
- Redirecting the customers to other online marketplaces offering the product to the customers
How the new regulation affect the marketplaces functioning:
The new regulation gives marketplaces additional responsibilities apart from the routine calculating, collecting and payment of taxes.
A. Monitoring the sellers compliance of the EU rules
Online marketplaces conduct regular checks on the sellers’ behavior regarding compliance:
- Are sellers using a valid VAT number
- Do sellers use the correct VAT number for member states
- Non compliant sellers are denied access to use their platform in order to avoid penalising the tax authorities
B. Real-time calculation and allocation of VAT transactions
Online marketplaces can apply new tax rules as per transaction happen:
- Calculate tax amount in the right current by applying the correct percentage
- Calculate the liable tax person for the items ordered
C. Issue invoices inclusive of the new rules
The percentage of tax applied for each line item differs; multiple invoices need to be issued for each consignment
D. Time constraint addressed
- The time calculation of delivery is precise for the buyer, as the tax payment is done by MP according to the item and rate
- It calculates the time spent on custom in every EU state and adjusts timing accordingly
Our product salesvat.com needless to say, is guiding all the players involved in VAT payment. Our team can share with you the details of the product, please talk to you and allow us the space to help your team find everlasting solutions.
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