From 2021: New VAT rules for online retail in the EU

This week, the finance ministers of the EU member states agreed on new VAT rules for online retailers. Accordingly, in the future, senders with customers in other EU states are to declare VAT in German via a central point of contact. This is intended to prevent traders from having to continue filing tax returns abroad.

Currently, traders in another EU country become liable for VAT if they exceed certain turnover thresholds with their customers there. While these vary from member state to member state, they are currently often 35,000 euros per year. Until the threshold is reached, senders must pay tax in Germany on their sales to customers from the EU state in question. Those who exceed this threshold must register for tax abroad and file tax returns there.

However, this system will only apply until 2020, after which entrepreneurs are to declare their foreign VAT via a one-stop shop and transfer the VAT to a domestic account. What this will look like in concrete terms has not yet been determined. However, the upcoming "one-stop store" could, for example, be an online portal of the German tax authorities. But that is not the only innovation.

Parallel to the "one-stop store," the different thresholds will also be harmonized, so that an EU-wide threshold of 10,000 euros will apply in the future. Up to this value, however, mail-order sales to EU foreign customers can still be taxed in Germany in the future. This makes it easier for online retailers to submit their VAT returns if they engage in cross-border e-commerce. However, foreign VAT law will continue to apply, meaning that mail order companies will have to determine and apply the applicable tax rate of an EU country.

DIn future, the new rules will also apply to online trading via marketplaces such as Amazon and eBay. And that in itself is also good news, because new measures are intended to make competition on marketplaces fairer. Until now, sales via Amazon & Co. were often not subject to VAT at all - especially for sales by non-EU traders. This is because the import of goods up to a value of 22 euros is currently exempt from import VAT by law. However, this exemption limit is often fraudulently exploited by non-EU traders by under-declaring values.

Thus, in the future, not only will the 22-euro exemption limit no longer apply. In addition, the platform operator will in future be liable to pay VAT on mail-order transactions by companies from outside the EU. However, this tax liability is limited to deliveries of goods up to 150 euros, as customs duties are incurred anyway for higher values of goods. However, if the seller from a non-EU country sells via his own website, the problem remains that import VAT can be avoided by under-declaring the value of the goods or other circumvention strategies.

At the national level, regulations against VAT fraud are also planned - independently of the EU legislation. According to these, online marketplaces are to be liable if the retailer fails to pay its sales tax. From 2021, however, this would then only be relevant for cases in which the platform does not already have its own tax liability.