The VAT legislation on B2C supplies in the European Union will change per July 1, 2021.
VAT rules on Distance Selling (B2C E-Commerce) applicable till July 1, 2021
Before July 1, 2021, the VAT impact on B2C Distance Selling (E-Commerce) is as follows:
- The transaction is taxed on the country where the transport to the non-taxable person ends
- VAT needs to be added to the cost at the VAT rates applicable in that country
- The supplier needs to be VAT registered in the country where the transport to the non-taxable person ends (+ filing of VAT return, payment of VAT to the authorities, etc)
- In case the total amount of sales does not exceed the threshold to apply the ”general” rule, VAT is due in the country where the transport starts (art. 32 of the EU VAT Directive 2006/112/EC). The threshold is country specific for each EU Member State and is between 35KEUR and 100KEUR (or its equivalent in any other currency). For the overview, click Distance Selling threshold (Avalara) / Distance selling thresholds and VAT rates (GlobalVATCompliance)
- In case the value of the good sold is equal or below 22EUR (the so called ”low value consignments”),
Relevant articles in the EU VAT Directive 2006/112/EC
Place of Supply
- By way of derogation from Article 32, the place of supply of goods dispatched or transported by or on behalf of the supplier from a Member State other than that in which dispatch or transport of the goods ends shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer ends, where the following conditions are met:
(a) the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;
(b) the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier.
1. Provided the following conditions are met, Article 33 shall not apply to supplies of goods all of which are dispatched or transported to the same Member State, where that Member State is the Member State in which dispatch or transport of the goods ends:
(a) the goods supplied are not products subject to excise duty;
(b) the total value, exclusive of VAT, of such supplies effected under the conditions laid down in Article 33 within that Member State does not in any one calendar year exceed EUR 100000 or the equivalent in national currency;
(c) the total value, exclusive of VAT, of the supplies of goods, other than products subject to excise duty, effected under the conditions laid down in Article 33 within that Member State did not in the previous calendar year exceed EUR 100000 or the equivalent in national currency.
2. The Member State within the territory of which the goods are located at the time when their dispatch or transport to the customer ends may limit the threshold referred to in paragraph 1 to EUR 35000 or the equivalent in national currency, where that Member State fears that the threshold of EUR 100000 might cause serious distortion of competition.
Member States which exercise the option under the first subparagraph shall take the measures necessary to inform accordingly the competent public authorities in the Member State in which dispatch or transport of the goods begins.
3. The Commission shall present to the Council at the earliest opportunity a report on the operation of the special EUR 35000 threshold referred to in paragraph 2, accompanied, if necessary, by appropriate proposals.