Proposal by the European Commission for the modernization of VAT as regard Ecommerce


On December 5th, the European Commission approved the VAT package for the modernization of Ecommerce of goods and services in the EU territory, by a Directive and two Regulations. The purposes of this measure are:

– To facilitate the international trading

– Combat VAT fraud

– Ensure free competition for operators in the EU

– Give the same treatment for online publications.

This proposal is part of the so-called “VAT Action Plan”, which seeks to modernize the system and operation of VAT in the EU. In particular, this proposal intends to introduce new rules regarding the VAT scheme of distance sales of goods, changing the way in which taxpayers must collect and pay VAT for said sales before each Tax Administration of the Member State where they are carried out, just as from 2015 it is done with the electronically supplied services.

Therefore, the measures that will be introduced in the VAT Directive and its dates of entry into force are the following:

  1. In 2018 will enter into force the threshold of € 10,000 per year under which taxpayers who make sales of goods or services to other Member States will be liable for VAT in their country of establishment like a local sale. In addition, under € 100,000 of annual sales, they will only need to use one of the measures to justify the consumer’s location (simplification measures).
  2. In 2021 the application of the Mini one-stop shop system will be extended for the services provided electronically to the sale of goods too, so that the VAT scheme of distance selling of goods will disappear.

Currently, under the distance selling scheme, an operator established in a Member State from which it sells goods to a final consumer who has his habitual residence in another Member State and where the goods are sent by the operator, must charge the VAT corresponding to the Member state where the consumer resides, once the annual threshold that each country has established is exceeded. This means the obligation of the operator to request a VAT id. number in each Member State where it exceeds the annual sales threshold and to comply with its periodic VAT obligations towards each Administration.

However, with the amendment that will come into force in 2021, although each sale will still be subject to VAT int the country of residence of the consumer, the operators will no longer have to apply for a VAT number of each Member State, but will be able to comply with its VAT obligations in their own country of establishment.

Likewise, this Mini One-stop shop scheme will be extended to imports for small commercial shipments, so that importers will declare VAT on import through it.

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