Actually, by 1 January 2021, many things in the area of cross-border online trade & Value Added Taxshould become easier.
This will now be the case at the earliest six months later - on 1 July 2021 - and only to a very limited extent.
What's this about?
Implementation of the VAT E-Commerce Package
The so-called VAT E-Commerce Package aims to adapt EU-wide VAT law to the needs of the digital economy.
Background: It must be borne in mind that the essential elements of VAT law are still at the 1993 level. E-commerce in its present form did not even begin to exist at that time. It is therefore not surprising that one of the basic norms - which are also to be reformed - is called the mail order regulation.
What the VAT E-Commerce Package means for online merchants and their tax advisors, we explained in a guest article for our partner DATEV at the beginning of the year.
The most important effects are briefly summarised below.
- Elimination of national delivery thresholds and the introduction of a global EU delivery threshold of 10,000 euros, so that practically all cross-border B2C deliveries are always taxable in the country of destination.
- In order to avoid the associated obligation to register in virtually (almost) all EU states, a one-stop shop (OSS) is to be introduced, through which all Value Added Taxdeclarations can be processed in the state of domicile.
The Federal Ministry of Finance had already set about implementing these changes on January 1, 2021 - in the so-called Annual Tax Act 2020 - see here from page 20.
Here, at least for many changes in the areaValue Added Tax , the date of 1 January must now be adjusted to 1 July 2021.
However, it is also possible that another postponement will take place at a later date.
Officially: Postponed until July 1, 2021, but...
The problem with implementing the e-commerce package is the technology. The OSS has existed in a slimmed-down version, the so-called mini one-stop shop for digital services, since 2015.
However, the MOSS does not yet function smoothly either and currently records only a fraction of the VAT revenue which the OSS is to process in future.
In addition, two aspects have been holding the project back for years.
- The technical implementation by the 27 national tax authorities is a mammoth project for all countries.
- Through the OSS, clearing is carried out by the host state. This means that State A must be able to rely on State B to collect and pay the due Value Added Tax amount properly.
If one considers how mammoth projects are managed on the public side and how the relationship of trust between the EU states is - see the negotiations on the EU Covid19 package - then one can at least doubt a quick and efficient solution.
If one reads the above-mentioned source of the Commission's official postponement to the end, one comes across the following passage.
What does that mean?
If the two EU model pupils Germany and the Netherlands have doubts about a stable and timely solution and wish for a postponement to 1 January 2022 - at the earliest! - then this could also - with a certain probability - happen later.
Value Added Tax is by far the most fraud-prone type of tax and leads to ever increasing compliance costs for companies.
A reform is therefore imperative.
Will the 27 EU states succeed in doing so?
Even if the VAT E-Commerce Package is implemented on July 1, 2021 or later, the OSS and everything that comes with it will not bring relief to most businesses - see here.
Taxdoo is the compliance platform for the digital economy
... and forms for the leading online retailers in Europe besides the handling of the current Value Added Tax-Compliance, Intrastat and financial accounting (Taxdoo is a partner of DATEV) also offers numerous other compliance services via a unique platform.
If you want to know more about how you Value Added Taxcan efficiently and securely map compliance, financial accounting and much more via a platform, then book your individual and free initial consultation with the compliance experts from Taxdoo!
You are also welcome to register for our regular demo webinar in which we will introduce Taxdoo and our compliance services and answer your questions personally.
P.S.: Taxdoo has been an official partner of DATEV in online trading since the beginning of 2020.