The new rules to value added tax (VAT) will come into force on 1 July 2021 in European Union (EU) affecting the business-to-consumer (B2C) sales in EU also known as distance or remote sales.
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Sellers using warehouses located in the EU have to register for VAT purposes in EU country where the inventories are held. In order to report this sales those sellers can use the VAT registration number and also the rate of the country of dispatch provided that the sales do not exceed the “the distance sales threshold”. This threshold is set by each EU member state, and if the threshold is exceeded the seller has to register in that country and charge the VAT rate based on the rate of the country of arrival. The current annual remote threshold for distance sales is approximately at the level of EUR 35 000 (except e.g. Germany, Netherlands, Luxembourg where it is EUR 100 000).
The remote distance threshold by country is replaced by a new EU-wide threshold of EUR 10 000 (for all member states cumulatively)
Below this threshold the supplies may remain subject to VAT in the Member State where the taxable person is established. When this threshold is met, the VAT rate of the country of arrival has to be used for distance sales. This means that the seller has to be potentially registered in all EU members states to report for the VAT all the distance sales.
This regime was created in order to simplify the VAT reporting’s. Online sellers, including online marketplaces/platforms can choose this option and register in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU. The VAT will be reported quarterly and Tax authorities will distribute the remitted VAT to other member states.
Keep in mind that the VAT registration has to be kept in all the member states where the inventory is held to report transactions other than remote or distance sales ( all B2B transactions, domestic sales etc.)
We in Deveho are working on this topic and also monitoring how all those changes will be implemented in local legislations in order to meet all the needs and preferences of our clients.