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Council Directive (EU) 2017/2445 establishes new regulations for the purposes of VAT, with effect January 1, 2021, in the treatment of e-commerce in goods, commonly called as distance sales of goods and electronic services rendered to private individuals.
This new regulatory package aims, on the one hand, to expedite the fiscal obligations of economic operators engaged in this type of trade and, on the other, that the tax Administrations of the different Member States have greater control over them, in order to control and minimize as much as possible tax fraud that exists to date in this type of trade.
Although electronic commerce refers to both goods and services, in this case, we will refer exclusively to electronic commerce of goods in which the recipient of the operation is an individual (non-taxable person). In this case, major companies affected are those that sell goods to individuals (usually through an on-line channel).
In the case of the supply of services electronically to individuals, the VAT to be applied will be that of the Member State where the recipient of the services received resides, the service provider having to pass the VAT of said Member State and declare the operations through the Mini One-Stop Shop (MOSS)from the Spanish Tax (AEAT) website, which we will explain later.
In order to analyze the main implications of the entry into force of this EU Directive for these companies that make distance sales, we believe it is useful to distinguish between two temporary scenarios, the current one and the new scenario that will enter into force on January 1, 2021, at which time this Directive will deploy its full effects.
Current situation: until January 1, 2021
1. VAT implications
- Currently, those Spanish companies and start -upsengaged in the sell of goods through internet, can voluntarily choose to charge the Spanish VAT, provided they do not exceed the threshold in each Member State where customers -individuals- are established (mainly € 35,000) or , directly, charge the VAT of the Member State where the customer is located (final consumer). With this, to a certain extent, the administrative and fiscal burden of complying with VAT obligations in the other EU Member States is reduced, if we do not exceed the sales threshold established in each of the countries where final customers have their residence. However, exceeded this threshold, the registration in those EU Member States of destination must apply with the tax rate prevailing in those EU countries and also, the compliance with tax obligations should be reviewed.
- In terms of billing, each Member State regulates the data that the invoices must contain. Since fulfill this requirement is very burdensome for start-ups and small-size companies, it is allowed to apply the rules of Spanish turnover in all invoices issued to other EU Member States.
- In case of a hard Brexit (without agreement with the EU), just remember that, the sales to the United Kingdom will be considered sales to a third country, subject to comply with all the export provisions in force in the EU. For more information, visit our alert on the fiscal effects of Brexit.
- Finally, we would like to recall that when distance sales of goods are carried out abroad EU, the seller should pay particular attention to the conditions established in the country of destination of these sales. Among others, it is essential to conduct a study of the import duties and the non-barriers to trade, as well as the conditions imposed by the courier companies, in order to offer an express shipping and a direct channel of communication with foreign customers.
2. Customs implications (for individuals)
- The imports into Spain of products with low value are exempted from import VAT provided that the value of the goods does not exceed 22 euros. Up to now, it is enough to simply present goods at customs without completing a customs declaration.
- Likewise, it should be taken into account that goods that do not exceed € 150 are exempt from import duties.
3. Excise Duties
- Alcohol and alcoholic beverages, as well as tobacco, are products subject to excise duties. Operators who make distance sales of these products have to do it following the rules and requirements of the intra-EU movement of excise goods, such as the distance selling regime.
Scenario as of January 1, 2021
1. VAT implications
From the entry into force of the EU Directive, there are three major developments that will occur in connection with distance sales of goods and supplies of services within the EU:
- the threshold of € 10,000 is established from which the VAT rate of the EU Member State of destination must be charged on and declared,
- the Mini One-Stop Shop (known as MOSS) to declare VAT for all transactions carried out through different EU Member States where individuals have their residence,
- in certain cases, the digital platforms (Amazon, Ebay , Aliexpress , ... ) will become taxable persons for such distance sales, and they will be obliged to charge, declare and enter the corresponding VAT before its local Public Treasury.
2. Customs Implications
- The import VAT exemption for goods whose value does not exceed 22 euros is eliminated. Additionally, the individual who purchases goods of less than € 150 must submit a simplified import declaration.
- The companies - including start - ups that carried out imports of goods in Spain that are later sent to other EU Member States under distance selling, they must submit a complete customs declaration. Subsequent delivery to the final customer -individual- in other EU Member States of the Union will be treated as an intra-EU delivery of goods.
With this VAT package, the legislator tries to cover the world of electronic commerce, trying, on the one hand, to harmonize and simplify the obligations of companies and, on the other, to have greater control of operations in order to minimize tax fraud.
How can we assist you?
From Salinas & Partners, we recommend operators who carry out their sales activity to individuals through the internet, to anticipate the necessary measures to have their companies prepared for the coming tax changes.
With more than 30 years of experience in indirect taxation and foreign trade, we are at your disposal for any questions or comments that may arise.
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