EU | EU-Wide Changes to e-Commerce VAT Rules Effective January 2019

In the run-up to the winter holidays, parliaments everywhere are debating draft budgets in time for the start of 2019. This year many EU Member State budgets’ contain provisions to implement the new rules relating to cross-border sales of electronic services, provided for under EU  Directive 2017/2455, and which come into effect as of 1st January 2019.

What is the purpose of this new legislation?

This directive together with two regulations form the basis of the European Commission’s e-commerce package.  This is an integral part of its Action Plan to modernise the EU VAT system, making it simpler, more robust and business-friendly.

The revised legislation impacts businessesespecially small and medium enterprises (SMEs) that sell electronic services on a B2C basis.  The aim is to simplify their VAT compliance obligations and foster the growth of cross-border trade.

What are the changes as of 1st January 2019?

  • New EU-wide place of supply rules for cross-border B2C supplies of electronic services. Currently, under the general rule, the place of supply is where the consumer is established or usually resides. The new rules include an exception to this general rule providing for the introduction of an annual EUR 10,000 turnover threshold applicable to EU suppliers. Unless this threshold was exceeded in the previous year or until it is exceeded in the current year such services will be subject to VAT in the country where the supplier belongs;
  • SMEs that generate annual revenues of less than EUR 100,000 from cross-border electronic services will only need to present one piece of evidence to verify the location of the consumer. At the moment, two pieces of evidence must be provided;
  • Businesses using the Mini One Stop Shop (MOSS), will be required to follow the invoicing procedures of their Member State of identification, instead of the current burdensome practice of applying the local rules of all the Member States to which supplies are made; and
  • The scope of the MOSS will be extended to allow non-EU established businesses with an EU VAT registration number to use the MOSS portal of their Member State of registration, to account for the VAT due on their sales of services to the EU.

If you believe your business may be affected by the above developments, please do get in touch, to discuss how we can help you.