Selling to other EU countries; significant changes on the way…!!
4th June 2015
The European Commission has announced its strategy for the EU digital single market which at its core aims to provide businesses, particularly entrepreneurs, with new opportunities to scale up across Europe.
Interestingly one of the proposals is that the ‘mini one-stop shop’ or MOSS introduced on 1 January 2015 for digital services should be extended to tangible goods ordered online both within and outside the EU. Essentially, the rules will change so that VAT, on any sale of goods which currently falls under the distance selling regime, will be charged at the rate applicable to the customers Member State.
Some of the key objectives are to break down barriers to cross-border online activity including differences in contract and copyright law between Member States and reducing the VAT related burden.
The strategy is wide-ranging and recognises the complications of having to deal with many different national systems which in the EC’s words “represent a real obstacle for companies trying to trade cross-border both on and offline”. The ultimate objective has always been for the ‘destination’ principle to apply to all cross border supplies of goods and services such that any VAT due is brought to account in the customer’s country. The EC’s strategy is a further stage in meeting this ultimate objective and interestingly one of the proposals is that the ‘mini one-stop shop’ or MOSS introduced on 1 January 2015 for digital services should be extended to tangible goods ordered online both within and outside the EU such that VAT due in the customer’s country is brought to account via an electronic portal in the suppliers “home” country.
Essentially, the rules will change so that VAT, on any sale of goods which currently falls under the distance selling rules, will be charged at the rate applicable to the customers Member State. In short, a new, common EU-wide simplification measure (a VAT threshold) to help SME’s (replacing the current distance selling thresholds), which would allow for home country controls including a single audit of cross border businesses for VAT purposes. This would also result in the removal of the VAT exemption for the importation of small consignments from suppliers in third countries which is seen by the EC to give non EU suppliers a competitive advantage.
Although some of the proposals contained in the Commission’s publications may be relatively uncontroversial, others could prove to be contentious and gaining approval from all 28 Member States to the ideas outlined in the Commission’s papers may be difficult and time consuming.In terms of timetable, the Commission will make legislative proposals in 2016 so it may be some years before these proposals come into operation.
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