was carried over, but this Thursday, July 1, new rules for the application of value added tax (VAT) will come into force on transactions with goods through electronic commerce in the European Union.
Current regulations require that goods imported into the EU with a value of less than € 22 are exempt from VAT. With this legal change, there are no longer any benefits and VAT is now charged on all goods brought into the region.
Another change made to the new rules is the threshold after which a seller selling online must be registered for VAT purposes in a member state.
Until now, each country set its own limit, and there were several of them. From July 1, this threshold will be unique and will amount to 10 thousand euros – a ceiling that has already been applied since 2019 to electronic services sold online in the region. If this limit is exceeded, VAT is payable in the Member State to which the goods are delivered.
Registration of legal entities can now be done through an electronic portal, a single window, where all services related to the fulfillment of obligations in this matter are also centralized. This one-stop shop is available to retailers outside the EU as well as local merchants doing cross-border sales within the region.
“Instead of struggling with complicated procedures in other countries, [os comerciantes] they can register in their member state in their own language, ”explains the European Commission in a press release.
“Once registered, an online store can report and pay VAT on all of its sales in the EU through a quarterly declaration submitted at the department store. The transfer of VAT to the respective Member State will depend on the Single Window, ”he adds.
This standardization of tariffs and the centralization of VAT payments will also have an impact on consumers, who will no longer be surprised to be charged extra on the price at which they buy a particular product. Until now, price adjustments for local VAT have been made at the customs office of the destination country or by the delivery service that delivered the goods to the buyer.
Recall that the last time the VAT system in the EU was updated in 1993, when e-commerce was practically irrelevant.
For European retailers and the region’s economy, the new measures will also have a big impact. Applying VAT on all imported goods will end abuse. Research on this issue has confirmed incorrect labeling practices for products such as smartphones in order to exploit this exemption, which gives non-European suppliers an advantage over local ones.
Overall, it is estimated that this “trick” avoids costs for the providers who use it, and the loss of revenue for the European authorities in the amount of about 7 billion euros annually.
