American Businesses Seek EU VAT Clarifications

By Global Tax Weekly

On February 14, 2020, AmCham EU, the representative body for American business in the European Union, wrote a request for greater transparency on the progress of the 2021 VAT e-commerce package and its implementation.

The reforms, agreed by EU member states on March 12, 2019, are intended to simplify VAT rules for goods sold online and introduce new obligations on online marketplaces to require them to contribute in the fight against tax fraud.

Under the changes, due to be implemented on January 1, 2021, online marketplaces will be considered to act as the seller when they facilitate sales of goods with a value up to EUR150 (USD162) to customers in the EU by non-EU businesses using their platform. The same rules will apply when non-EU businesses use online platforms to sell goods from “fulfillment centers” in the EU, irrespective of their value, allowing tax authorities to claim the VAT due on those sales. Online platforms will also be expected to keep records of sales of goods or services made by businesses using their platform.

The member states also agreed implementing rules for the definitive VAT system that will be implemented from 2021, requiring the collection of tax based on the location of the consumer, rather than the supplier, in a bid to prevent VAT fraud. In particular, the rules deal with the extension of the one-stop shop system, which enables businesses to undertake all VAT administrative obligations with a single member state tax authority for all of their EU VAT operations.

AmCham EU also highlighted that shipments imported into the EU with a value below EUR22 will be subject to VAT as of January 1, 2021, and will require individual customs declarations. To facilitate these changes, a new optional simplification measure, the Import One Stop System (IOSS) for low-value shipments between EUR0-150 would allow “deemed suppliers” to collect and remit VAT at the point of sale, moving the collection process away from the border.

In a statement accompanying the publication of its letter to Stephen Quest, Director General of DG TAXUD, AmCham EU argued that there is a lack of transparency about member states’ readiness to implement the reforms.

“Throughout its development, AmCham EU members have closely followed and contributed to the discussions on this piece of legislation and now with a deployment window of less than 11 months, it is vital that the business community is provided with a clear communication of the state of implementation,” AmCham EU stated.

The organization added: “AmCham EU regrets that member states are not transparently sharing their readiness to deploy the required comprehensive processes and IT solutions for the upcoming VAT and customs changes, since this prevents businesses and relevant stakeholders from developing properly designed IT and other tools that will ensure a smooth transition of the new rules. A harmonized approach at the EU level would ensure that businesses are not faced with different implementation solutions in different member states.”

In particular, AmCham EU called for clarity on the following issues:

  • The readiness of EU member states to implement the Super Reduced Data Set (SRDS);
  • The implementation design for IOSS and special arrangement procedures and capacity readiness;
  • The functioning of an interface between Express and Postal Services and customs authorities; and
  • Practical information and options on VAT postponed accounting in the member states.

“The US business community stands ready to discuss these issues in more detail and we look forward to helping to deliver a successful implementation of the new rules and to ensure the best possible outcome for all stakeholders,” AmCham EU’s statement concluded.

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